10.00 points 1 know headquarters wants us to add that new product line,\' said D

Question

10.00 points 1 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 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 Salos $21,810,000 Variable expenses 13,741,200 Contribution margin 8,068,800 Fixed expenses Net operating income Divisional operating assets 6,040,000 S 2,028,800 s 4,363,000 The company had an overall return on in ostront (ROI) of 18 00% last year (crsdoing all d isions The Office Products Division has an opportunity to add a new product line that would require an additional investment in operating assets of $2,350,000 The cost and revenue characteristics of the new product line per year would be Sales 9,396,500

Explanation / Answer

1)statement showing ROI

3)If Adding newline will decrease companys over all ROI From 46.5%to41.01%

?4a)statement showing residual income

New line$

b)Residual income After Adding New line will increase by371400$i.e (1745750 -1374350)

   Hence ?We will accept new product line

Present$ New line$ Total$ Sales 21810000 9396500 31206500 Net Opareting income 2028800 723900 2752700 opareting assets 4363000 2350000 6713000 Margin 9.3% 7.7% 8.82% Turnover 5 4 4.65 ROI 46.5% 30.8% 41.01%

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