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Problems 13-18 Return on Investment (ROI) and Residual Income |LO2, LO3] 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 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 the most recent year are given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Divisional operating assets 6,000,000 4,000,000 3,200,000 800,000 4,000,000 The company had an overall return on investment (ROI) of 15% last year (considering all divisions). The Office Products Division has an opportunity to add a new product line that would eqaire an additional investment in operating assets of $1,000,000. The cost and revenue character stics of the new product line per year would be: Sales Variable expenses $2,000,000 60% of sales $640,000

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