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Its all 1 question vehue 10.00 ponts 1 know headquarters wants us to add that new product line, said Dell Havasi, manager of Billings Company's
Its all 1 question
vehue 10.00 ponts 1 know headquarters wants us to add that new product line," said Dell Havasi, manager of Billings Company's Office Products Division. "But I want to see the numbers before I make any move. Our division's return on investment (ROI) has led the company for three years, and I don't want any letdown Billings Company is a decentralized wholesaler with tive autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROls. Operating results for the company's Office Products Division for the most recent year are given below Sales S 22,100,000 Variable expenses 13,893,400 Contribution margin 8,206,600 Fixed expenses Net operating income Divisional operating assets 6,085,000 S 2,121,600 s 5,200,000 The company had an overall return on vestment (ROof 16 00% last year (considering all divisions) The Office Products Division has an opportunity to add a new product line that would require an additional investment in operating assets of $2,387,500. The cost and revenue characteristics of the new product line per year would be: $ 9,550,000 65% of sales Variable expenses Fixed expenses $ 2,578,500 Required: 1. Compute the Office Products Division's ROl for the most recent year, also compute the ROl as it would appear if the new product line is added (Do not round intermediate cakculations. Round Turnover answers to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (ie., 0.1234 should be entered as 12.34) Net operating income Operating asset Tunover ROI Check Your Work Step by Step Solution
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