Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please help me solve I know headquarters wants us to add that new product line, said Dell Havasi, manager of Billings Company's Office Products Division.
Please help me solve
I 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 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 this year are given below: Sales Variable expenses Contribution marain Fixed expenses Net operating income Divisional average operating assets $23,000,000 14,365,000 8,635,000 6,220,000 $ 2,415,000 $5,001,000 The company had an overall return on investment (ROI) of 16.00% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by $2,501,000. The cost and revenue characteristics of the new product line per year would be: Sales Variable expenses Fixed expenses $10,100,000 65% of saies $2,644,900Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started