70.2K

Verified Solution

Link Copied!

Check my work "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 (RO 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 Variable expenses Contribution margin Fixed expenses Net operating income 10,000,000 6,000,000 4,000,000 3.200,000 s 800,000 Divisional average operating assets4,000,000 The company had an overall return on investment (RO) of 15% this year (considering all divisions). Next year the Office Products Divisio operating assets by $1,000,000. The cost and revenue characteristics of the new product line per year would be: n has an opportunity to add a new product line that would require an additional investment that would increase average $2,000,000 60% of sales $640,000 Variable expenses Required 1. Compute the Office Products Division's ROI for this year. 2. Compute the Office Products Division's ROl for the new product line by itselt 3. Compute the Office Products Division' s ROl for next year assuming that it performs the same as this year and adds the new product K Prev 3 of 3Next

Answer & Explanation Solved by verified expert

See Answer