second question

"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 margin 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 Onice Products Division has an opportunity to add a new product line that would require an additional investment that would increase verage 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 sales $2,644,900 Required: 1. Compute the Office Products Division's margin, turnover, and ROI for this year. 2. Compute the Office Products Division's margin, turnover, and ROI for the new product line by itself 3. 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. If you were in Dell Havasi's position, would you accept or reject the new product line? 5. Why do you suppose headquarters is anxious for the Office Products Division to add the new product line? 6. Suppose that the company's minimum required rate of return on operating assets is 13% and that performance is evaluated using residual income. a. Compute the Office Products Division's residual income for this year. b. Compute the Office Products Division's residual income for the new product line by itself C. Compute the Office Products Division's residual income for next year assuming that it performs the same as this year and adds the new product line. d. Using the residual income approach, if you were in Dell Havasi's position, would you accept or reject the new productie? Complete this question by entering your answers in the tabs below. Req 1 to 3 Reg 4 Reg 5 Reg 6A to 60 Reg 6D 1. Compute the Office Products Division's margin, turnover, and ROI for this year. 2. Compute the Office Products Division's margin, turnover, and ROI for the new product line by itself. 3. 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. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Show less % 1. ROI for this year 2. ROI for the new product line by itself 3. ROI for next year % % Req4 > Complete this question by entering your answers in the tabs below. Reg 1 to 3 Reg 4 Reg 5 Reg 6A P 6C Req 6D 6. Suppose that the company's minimum required rate of return on operating assets is 13% and that performance is evaluated using residual income. a. Compute the Office Products Division's residual income for this year. b. Compute the Office Products Division's residual income for the new product line by itself. C. Compute the Office Products Division's residual income for next year assuming that it performs the same as this year and adds the new product line. 1. Residual income for this year 2. Residual income for the new product line by itself 3. Residual income for next year Sharp Motor Company has two operating divisions-an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of operating the cafeteria are budgeted at $79,000 per month plus $0.70 per meal served. The company pays all the cost of the meals. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 72% of the peak- period requirements, and the Truck Division is responsible for the other 28%. For June, the Auto Division estimated it would need 93,000 meals served, and the Truck Division estimated it would need 63,000 meals served. However, due to unexpected layoffs of employees during the month, only 63,000 meals were served to the Auto Division. Another 63,000 meals were served to the Truck Division as planned. The cafeteria's actual fixed costs for June totaled $85,000 and its actual meal costs totaled $104,200. Required: 1. How much cafeteria cost should be charged to each division for June? 2. Assume the company follows the practice of allocating all cafeteria costs incurred each month to the divisions in proportion to the number of meals served to each division during the month. On this basis, how much cost would be allocated to each division for June (Round your intermediate calculations to 2 decimal places.) Auto Division Truck Division 1. Total cost charged 2. Total cost allocated