son, Noreen, Brewer, 15e, Performance Measurement in Decentralized Organizations PROBLEM 11-18 Return on Investment (ROI) and Residual Income [L011-1, L011-2 "I know headquarters wants us to add that new product linc," 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 (ROID has led the company for three years, and I don't want any lctdown." Billings Company is a decentralized wholesaler with five autonomous divisions. The divi- sions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company's Office Products Division for the most recent year are given below: Sales Variable expenses .. Contribution margin.... Fixed expenses . Net operating income.. Divisional operating assets $10.000,000 6,000,000 4,000,000 3.200,000 S 800,000 S 4,000,000 The company had an overall return on investment (ROl) of 15% 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 opcrating assets of $1.000.000. The cost and revenuc character- istics of the new product line per year would be Sales Variable expenses.... Fixed expenses... $2,000,000 60% of sales $640,000