Problem 11-21 (Algo) Return on Investment (ROI) and Residual Income [, LO11-2] know headquarters wants us to add that new product Dell Havaslmanager of Billings Companys Office Products Division But I want to see the numbers before make any move. Our divisions return on investment (ROl) has led the company for three years, and I dont want any letdown Billings Company a decentraiized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI. year-end bonuses given to the divisional managers who have the highest . Operating results for the companys Office Products Division for this year are given below : Sales Variable expenses Contribution margin Fixed expenses Net operating income Divisional average operating assets $ 22,708 , B, 336, , 175,000 2,161,300 $ The company had an overall return on investment () 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 that would increase average operating assets by $3.938,000 . The cost and revenue characteristics of the new product line per year would Sales Variable expenses Fixed expenses % of sales

Problem 11-21 (Algo) Return on Investment (ROI) and Residual Income (L011-1, LO11-2] "know headquarters want us to add that product nesad Dell Havasi, manager of Billings Company's Office Products Division I want to see the numbers before I make any move. Our division's return on investment Ro has led the company for three years and I don't want any letdown Billing Company is a decentralized wholesale with five autonomous divisions. The divisions are evaluated on the basis of Rot, with year-end bonuses given to the divisional managers who have the highest Operating results for the company's Office Products Division for this year are given below 322,700,000 34.363,700 6,200 3,175,000 Variable expenses Contribution margin Fixed expenses Net operating income Divisional average operating assets $ 5,675,00 The company had an overall return on invest 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 53.938.000 The cost and revenue characteristics of the new product line per year would be Sales variable expenses Fixed expenses 30,100,000 oss of sales 39,12,000 Requiredt 1 Compute the Office Products Division's margin, turnover, and ROI for this year 2. Compute the Office Products Division's margin. turnover, and Rol for the new product line by itselt 2. Compute the Office Products Division's margin, turnover and ROI for next year assuming that it performs the same as this year and adds the new product line 4. you were in Den Havasi's position would you accept or reject the new product line? Why do you suppose headquarters is nous for the Office Products Division to add the new productine? 6. Suppose that the company's minimum required rate of return on operating assets is 13 and that performance is enhed using residual income a Compute the Office Products Divisions residual income for this year b. Compute the Office Products Division's residus income for the new product line by itselt cCompute the Office Products Divion's residual income for next year suming that performs the same this year and adds the new product line d. Using the residual income approach, if you were in Dell His position would you accept or reject the new producte? 1 of 1