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 a decision. Our division's return on investment (ROI) has led the company for threeyears, and I don't want any letdown."Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated using ROL with year-endbonuses given to the divisional managers who have the highest ROIS. Operating results for the company's Office Products Division forthis year are given below:SalesVariable expensesContribution marginFixed expensesNet operating incomeDivisional average operating assetsThe company had an overall return on investment (ROI) of 17.00% this year (considering all divisions). Next year the Office ProductsDivision has an opportunity to add a new product requiring $2,755,000 of additional average operating assets. The annual cost andrevenue estimates for the new product would be:$ 9,915,000$ 2,607,450SalesVariable expensesFixed expenses$ 22,835,00014,297,2008,537,6006,190,000$ 2,347,800$4,000,00065% of salesRequired:1 Compute the Office Products Division's margin, turnover, and ROI for this year.2. Compute the Office Products Division's margin, turnover, and ROI for the new product by itself.3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming it performs the same as this year and addsthe new product.4. If you were in Dell Havasi's position, would you accept or reject the new product?5. Why do you suppose headquarters is anxious for the Office Products Division to add the new product?6. Suppose the company's minimum required rate of return on operating assets is 14% and performance is evaluated using residualincome.a. Compute the Office Products Division's residual income for this year.b. Compute the Office Products Division's residual income for the new product by itself.c. Compute the Office Products Division's residual income for next year assuming it performs the same as this year and adds thenew product.d. Using the residual income approach, if you were in Dell Havasi's position, would you accept or reject the new product?Required 1 toComplete this question by entering your answers in the tabs below.Required 4 Required 5Required 6A to Required 606C1. Compute the Office Products Division's margin, turnover, and ROI for this year.2. Compute the Office Products Division's margin, turnover, and ROI for the new product by itself.3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming it performs the same as this yearand adds the new product.Note: Do not round intermediate calculations. Round your answers to 2 decimal places.1. Margin, tumover, and ROI for this year2. Margin, tumover, and ROI for the new product line by itself3. Margin, tumover, and ROI for next yearRequired 1 to 3MarginTurnoverRequired 4 >ROIShow less A

"Since you have asked a question with sub-parts more than three, as per guidelines, the first three sub-parts are answered for you. If you want the remaining sub-parts to be answered, please post the remaining sub-parts separately".Ratio analysis:Ratio analysis is a powerful tool used by businesses, investors, and financial analysts to evaluate the financial health of an organization. Financial ratios are calculated by dividing one financial metric by another to provide a measure of the relationship between the two metrics.The following are the excel formulas for above calculations:

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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 a decision. 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 using ROL with year-end bonuses given to the divisional managers who have the highest ROIs Operating results for the company's Office Products Division for this year are given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Divisional average operating assets $ 22,835,000 14,297,200 8,537,800 6,190,000 Sales Variable expenses Fixed expenses $2,347,800 $4,000,000 The company had an overall return on investment (ROI) of 17.00% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product requiring $2,755,000 of additional average operating assets. The annual cost and revenue estimates for the new product would be: $ 9,915,000 $ 2,607,450 65% of sales

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 a decision. 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 using ROL with year-end bonuses given to the divisional managers who have the highest ROIs Operating results for the company's Office Products Division for this year are given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Divisional average operating assets $ 22,835,000 14,297,200 8,537,800 6,190,000 Sales Variable expenses Fixed expenses $2,347,800 $4,000,000 The company had an overall return on investment (ROI) of 17.00% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product requiring $2,755,000 of additional average operating assets. The annual cost and revenue estimates for the new product would be: $ 9,915,000 $ 2,607,450 65% of sales

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.” 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 ROIs. Operating results for the company’s Office Products Division for this year are given below: Sales $ 22,835,000 Variable expenses 14,297,200 Contribution margin 8,537,800 Fixed expenses 6,190,000 Net operating income $ 2,347,800 Divisional average operating assets $ 4,000,000 The company had an overall return on investment (ROI) of 17.00% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product line that…
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