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"I know headquarters wants us to add that new product line, said Dell Havasi, manager...

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"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 pany is a decentralized wholesaler with five autonomous divisions. The divisions are Billings Com 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 5 10,000,000 Variable expenses 6,000,000 Contribution margin 4,000,000 Fixed expenses Net operating income Divisional operating assets 3,200,000 5 800,000 5 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 require an additional investment in operating assets of $1,000,000. The cost and revenue characteristics of the new product line per year would be: Sales Variabl Fixed expenses 52,000,000 60% of sales 5640,000 e expenses

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