Faced with headquarters' desire to add a new product line, Stefan Grenier, manager of Bilti Products' East Division, felt that he had to see the numbers before he made a move. His division's ROI has led the company for three years, and he doesn't want any letdown. Bilti Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year- end bonuses given to divisional managers who have the highest ROI. Operating results for the company's East Division for last year are given below: Sales Variable expenses Contribution margin Fixed expenses Operating income Divisional operating assets The company had an overall ROI of 16% last year (considering all divisions). The new product line that headquarters wants Grenier's East Division to add would require an investment of $3,800,000. The cost and revenue characteristics of the new product line per year would be as follows: Sales Variable expenses Fixed expenses $ 11,400,000 $ 3,306,000 $26,600,000 14,120,000 12,480,000 10,086,000 $ 2,394,000 $ 6,650,000 65% of sales Required: 1. Compute the East Division's ROI for last year, also compute the ROI as it would appear if the new product line were added. (Do not round intermediate calculations. Round your final answer to the nearest whole number.)
Faced with headquarters' desire to add a new product line, Stefan Grenier, manager of Bilti Products' East Division, felt that he had to see the numbers before he made a move. His division's ROI has led the company for three years, and he doesn't want any letdown. Bilti Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year- end bonuses given to divisional managers who have the highest ROI. Operating results for the company's East Division for last year are given below: Sales Variable expenses Contribution margin Fixed expenses Operating income Divisional operating assets The company had an overall ROI of 16% last year (considering all divisions). The new product line that headquarters wants Grenier's East Division to add would require an investment of $3,800,000. The cost and revenue characteristics of the new product line per year would be as follows: Sales Variable expenses Fixed expenses $ 11,400,000 $ 3,306,000 $26,600,000 14,120,000 12,480,000 10,086,000 $ 2,394,000 $ 6,650,000 65% of sales Required: 1. Compute the East Division's ROI for last year, also compute the ROI as it would appear if the new product line were added. (Do not round intermediate calculations. Round your final answer to the nearest whole number.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Faced with headquarters' desire to add a new product line, Stefan Grenier, manager of Bilti Products' East Division, felt that he had to
see the numbers before he made a move. His division's ROI has led the company for three years, and he doesn't want any letdown.
Bilti Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year-
end bonuses given to divisional managers who have the highest ROI. Operating results for the company's East Division for last year
are given below:
Sales
Variable expenses
Contribution margin
Fixed expenses
Operating income
Divisional operating assets
The company had an overall ROI of 16% last year (considering all divisions). The new product line that headquarters wants Grenier's
East Division to add would require an investment of $3,800,000. The cost and revenue characteristics of the new product line per year
would be as follows:
Sales
Variable expenses
Fixed expenses
$ 11,400,000
$ 3,306,000
$26,600,000
14,120,000
12,480,000
10,086,000
$ 2,394,000
$ 6,650,000
65% of sales
Required:
1. Compute the East Division's ROI for last year, also compute the ROI as it would appear if the new product line were added. (Do not
round intermediate calculations. Round your final answer to the nearest whole number.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education