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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
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 don't want any letdown." Billings Company is a decentralized wholesaler with five 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: 21,600,000 Sales 13,622,600 Variable expenses 7,977,400 Contribution margin 6,010,000 Fixed expenses 1,967,400 Net operating income 4,499,200 Divisional operating assets The company had an overall return on investment (ROI) of 1 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 $2,326,200. The cost and revenue of the new product line per year would be: 9,300,000 Sales 65% of sales Variable expenses 2,557,400 Fixed expenses
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