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REQUIRED: Faced with headquarters' desire to add a new product lin Stefan Grenier, manager of Bilti Products' East e, Division, felt that he had to
REQUIRED:
Faced with headquarters' desire to add a new product lin Stefan Grenier, manager of Bilti Products' East e, Division, felt that he had to see the numbers before he made a move. His division's return on investment (ROI) had led the company for three years, and he don'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: Sales 28,000,000 Variable expenses 14.000.000 Contribution margin 14,000,000 Fixed expenses 11,816,000 2,184,000 Operating income Divisional operating assets 5,600,000 The company had an overall ROI of 18% last year (considering all divisions). The new product line that headquarters wants Grenier's East Division to add would require an investment of S3,470,000. The cost and revenue characteristics of the new product line per year would be as follows: 10,410,000 Sales Variable expenses 65% of sales Fixed expenses 2,883,570 Faced with headquarters' desire to add a new product lin Stefan Grenier, manager of Bilti Products' East e, Division, felt that he had to see the numbers before he made a move. His division's return on investment (ROI) had led the company for three years, and he don'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: Sales 28,000,000 Variable expenses 14.000.000 Contribution margin 14,000,000 Fixed expenses 11,816,000 2,184,000 Operating income Divisional operating assets 5,600,000 The company had an overall ROI of 18% last year (considering all divisions). The new product line that headquarters wants Grenier's East Division to add would require an investment of S3,470,000. The cost and revenue characteristics of the new product line per year would be as follows: 10,410,000 Sales Variable expenses 65% of sales Fixed expenses 2,883,570Step by Step Solution
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