"I know headquarters wents us to add that new product line," said Dell Havesi, manoger 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) hes led the company for three years,and I don't want any letdown."Billings Company is a decentralized wholessler with five sutonomous divisions. The divisions are evalusted on the basis of ROI, withyear-end bonuses given to the divisional managers who have the highest ROls. Operating results for the company's Office ProductsDivision for this year are given below:$ 22,835,0OD14,297, 200SalesVariable expensesContribution marginFixed expenses8,537, HO06,190, e0e$ 2,347,80eNet operating incomeDivisional average operating assets4,e0e, e00The company hsd 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 line that would require on additional investment thet would increase averageoperating assets by $2,755,000. The cost and revenue charecteristics of the new product line per year would be:SalesVariable expenses$9,915,00065% of salesFixed expenses$2, 687,458Required:1. Compute the Office Products Division's margin, turnover, and ROI for this yeor.2. Compute the Office Products Division's margin, turnover, and ROl for the new product line by itself.3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming that it performs the same os this year andadds the new product line.4. If you were in Dell Havesi's position, would you accept or reject the new product line?5. Why do you suppose hesdquarters is anxious for the Office Products Division to sdd the new product line?6. Suppose that the company's minimum required rate of return on operating essets is 14% and that performance is evaluated usingresidual income.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 line by itself.c. Compute the Office Products Division's residual income for next year essuming that it performs the same es this year and adds thenew product line.d. Using the residual income approsch, if you were in Dell Havasi's position, would you accept or reject the new product line?Complete this question by entering your answers in the tabs below.Req 1 to 3Req 4Reg 5Req 6A to 6CReq 60If you were in Dell Havasi's position, would you accept or reject the new product line?OAcceptOReject< Req 1 to 3Req 5 > "I know headquarters wents us to add that new product line," said Dell Havesi, manoger 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 wholessler with five sutonomous divisions. The divisions are evalusted on the basis of ROI, withyear-end bonuses given to the divisional menagers who have the highest ROls. Operating results for the company's Office ProductsDivision for this year are given below:SalesVariable expensesContribution marginFixed expenses$ 22,835,80e14,297.20e8,537,8006,198, e00Net operating income$ 2,347, HODDivisional average operating assets$ 4, e00, e0eThe compony 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 line that would require an additional investment that would incresse averageoperating assets by $2,755,000. The cost and revenicharacteristics of the new product line per year would be:Sales$9,915,00065% of salesVariable expensesFixed expenses$2, 687,458Required:1. Compute the Office Products Division's margin, turnover, and ROI for this yeor.2. Compute the Office Products Division's margin, turnover, and ROI for the new product line by itself.3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming that it performs the same os this year andadds the new product line.4. If you were in Dell Havesi's position, would you accept or reject the new product line?5. Why do you suppose hesdquarters is anxious for the Office Products Division to add the new product line?6. Suppose that the company's minimum required rate of return on operating essets is 14% and that performance is evaluated usingresidual income.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 line by itself.c. Compute the Office Products Division's residual income for next year essuming that it performs the same as this year and adds thenew product line.d. Using the residual income approsch, if you were in Dell Havasi's position, would you accept or reject the new product line?Complete this question by entering your answers in the tabs below.Req 1 to 3Req 4Reg 5Req 6A to 6CReq 601. Compute the orrice Products Division's margin, turnover, and ROI for this year.2. Compute the offrice Products Division's margin, turnover, and ROI for the new product line by itself.3. Compute the orrice Products Division's margin, turnover, and ROI for next year assuming that it performs the same as thisyear and adds the new product line.(Do not round intermediate calculations. Round your answers to 2 decimal places.)Show less a1. ROI for this year2. ROI far the new product line by itself3. ROI for nnxt year< Reg 1 to 3Req 4 >

Return on Investment = Net IncomeTotal Investment Note: Since you have posted question with…

"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: Sales Variable expenses Contribution margin Fixed expenses Not operating income Divisional average operating assets $ 22,835, 000 14,297, 200 8,537, H00 6,198,800 2,347, HO0 $ 4,000, e00 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 would require an additional investment that would increase average operating assets by $2,755,000. The cost and revenue characteristics of the new product line per year would be: Sales Variable expenses Fixed expenses $9,915,000 65% of sales $2,607,450 Required: 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 line by itself. 3. Compute the Office Products Division's margin, turnover, and ROI for next year ossuming that it performs the same as this year and adds the new product line.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q