Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two offices-one in Toronto and one in Vancouver. The firm classifies the direct costs of consulting jobs as variable costs. A segmented contribution format income statement for the company's most recent year is given below. Total Company $1,000,000 100.eex 490,000 49.00 Toronto $ 3ee, eee 105,000 Office Vancouver 100% $ 709, eee 100% 35 385,eee 55 510, eee 280,000 51.00 28.ee 195,000 168,000 65 56 315, eee 112, eee 45 16 Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Operating income 230,000 23.ee $ 27 , 9% $ 203,000 29% 84, eee 8.40 $ 146,000 14.60% Required: 1. By how much would the company's operating income increase ir Vancouver increased its sales by $80,000 per year? Assume no change in cost behaviour patterns Increase in operating income 2-3. Refer to the original data. Assume that sales in Toronto increase by $120,000 next year and that sales in Vancouver remain unchanged. Assume no change in fixed costs. Prepare a new segmented income statement for the company. (Round your percentage answers to 2 decimal places.) Increase in operating incomo 2-a. Refer to the original data. Assume that sales in Toronto increase by $120,000 next year and that sales in Vancouver remain unchanged. Assume no change in fixed costs. Prepare a new segmented income statement for the company (Round your percentage answers to 2 decimal places.) Answer is not complete. Total Company Amount % Toronto Amount Segments Vancouver % Amount % 0 $ 0 0 0.00 000 0.00 0 0.00 $ 0 0 0.00 5 0.00 $ $ 0 0.00 Faced with headquarters' desire to add a new product line, Stefan Grenier, manager of Bilti Products' East Division, felt that he had to see the numbers before he made a move His division's ROI has led the company for three years, and he doesn't want any letdown Bilti Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to divisional managers who have the highest ROI Operating results for the company's East Division for last year are given below $33,600,000 15,020,000 Sales Variable expenses Contribution margin Fixed expenses Operating income Divisional operating assets 18,500,000 16,228, eee $ 2,352,000 $ 6,72e,eee The company had an overall ROI of 15% last year (considering all divisions) The new product line that headquarters wants Grenier's East Division to add would require an investment of $3,600,000 The cost and revenue characteristics of the new product line per year would be as follows: Sales Variable expenses Fixed expenses $14,400,000 70% of sales $ 3,744,000 Required: 1. Compute the East Division's Rol for last year, also compute the ROI as it would appear if the new product line were added. (Do not round intermediate calculations.) Present New Line Total ROI 1. Compute the East Division's ROI for last year, also compute the ROI as it would appear if the new product line were added (Do not round intermediate calculations.) Present New Line Total ROI 2. If you were in Grenier's position, would you accept or reject the new product line? Accept Reject 3. Why do you suppose headquarters is anxious for the East Division to add the new product line? Adding the new line would increase the company's overall ROI Adding the new line would decrease the company's overall ROI 4. Suppose that the company's minimum required rate of return on operating assets is 13% and that performance is evaluated using residual Income a. Compute East Division's residual income for last year, also compute the residual income as it would appear if the new product line were added Present New Line Total Residual income b. Under these circumstances, if you were in Grenier's position, would you accept or reject the new product line? 2. If you were in Grenier's position, would you accept or reject the new product line? t O Reject 3. Why do you suppose headquarters is anxious for the East Division to add the new product line? Adding the new line would increase the company's overall ROI. Adding the new line would decrease the company's overall ROI 4. Suppose that the company's minimum required rate of return on operating assets is 13% and that performance is evaluated using residual income a. Compute East Division's residual income for last year, also compute the residual income as it would appear if the new product line were added Present New Line Total Residual income b. Under these circumstances, if you were in Grenler's position, would you accept or reject the new product line? O Accept Reject