Problem 11-18 Return on Investment (ROI) and Residual Income DLO11-1, L011-2] "I know headquarters wants us to add that new product line said Dell Havasi, manager of Billings Company's Office Products Division. "But want to see the numbers before l make any move. Our division's return on investment (ROI) has led the company for three years, and l don't want any letdown. Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROl, 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 Contribution margin 7,977,400 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 17.00% 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 $2,326,200. The cost and revenue characteristics of the new product line per year would be: 9,300,000 Sales Variable expenses 65% of sales. Fixed expenses 2,557,400