Present New Line Total Required: 1. Compute the Office Products Division's ROI for the most recent year; also compute the ROI as it would appear if the new product line is added. (Round the "Margin", "Turnover" and "ROI" answers to 2 decimal places.) Operating assets Minimum required return Minimum net operating income Actual net operating income Minimum net operating income Residual income Present New Line Total Sales Net operating income Operating assets Margin Turnover ROI 2. If you were in Dell Havasi's position, would you accept or reject the new product line? b. Under these circumstances, if you were in Dell Havasi's position, would you accept or reject the new product line? Accept O Reject Accept O Reject 3. Why do you suppose headquarters is anxious for the Office Products Division to add the new product line? O Adding the new line would increase the company's overall ROI. O Adding the new line would Decrease the company's overall ROI. "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 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 the most recent year are given below: 4. Suppose that the company's minimum required rate of return on operating assets is 13.00% and that performance is evaluated using residual income. 22,700,000 Sales a. Compute the Office Products Division's residual income for the most recent year, also compute the residual income as it would appear if the new product line is added. 14,363,700 Variable expenses Contribution margin Fixed expenses 8,336,300 6,175,000 Net operating income $ 2,161,300 Divisional operating assets $5,675,000 Present New Line Total Required: 1. Compute the Office Products Division's ROI for the most recent year; also compute the ROI as it would appear if the new product line is added. (Round the "Margin", "Turnover" and "ROI" answers to 2 decimal places.) Operating assets Minimum required return Minimum net operating income Actual net operating income Minimum net operating income Residual income Present New Line Total Sales Net operating income Operating assets Margin Turnover ROI 2. If you were in Dell Havasi's position, would you accept or reject the new product line? b. Under these circumstances, if you were in Dell Havasi's position, would you accept or reject the new product line? Accept O Reject Accept O Reject 3. Why do you suppose headquarters is anxious for the Office Products Division to add the new product line? O Adding the new line would increase the company's overall ROI. O Adding the new line would Decrease the company's overall ROI. "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 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 the most recent year are given below: 4. Suppose that the company's minimum required rate of return on operating assets is 13.00% and that performance is evaluated using residual income. 22,700,000 Sales a. Compute the Office Products Division's residual income for the most recent year, also compute the residual income as it would appear if the new product line is added. 14,363,700 Variable expenses Contribution margin Fixed expenses 8,336,300 6,175,000 Net operating income $ 2,161,300 Divisional operating assets $5,675,000
