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*P11.55B (LO 4, 5) South division had the following results for the year just ended: Sales $1,500,000 Controllable $120,000 margin Contribution margin 600,000 Average operating assets Contribution margin South is considering a new product line that would involve the following: Sales 600,000 $300,000 Controllable margin 120,000 Average operating assets $ 24,000 150,000 South's parent company, Globe Inc., has a company-wide ROI of 14% and pays bonuses based on divisional ROI. Instructions a. Determine the effect on South's ROI if it introduces the new product line. Would South's managers be encouraged to introduce the new product line? b. Determine the effect on Globe Inc.'s ROI if South introduces the new product line. Would the top managers of Globe Inc. want to introduce the new product line? b. ROI of new product: 16%

*P11.55B (LO 4, 5) South division had the following results for the year just ended: Sales $1,500,000 Controllable $120,000 margin Contribution margin 600,000 Average operating assets Contribution margin South is considering a new product line that would involve the following: Sales 600,000 $300,000 Controllable margin 120,000 Average operating assets $ 24,000 150,000 South's parent company, Globe Inc., has a company-wide ROI of 14% and pays bonuses based on divisional ROI. Instructions a. Determine the effect on South's ROI if it introduces the new product line. Would South's managers be encouraged to introduce the new product line? b. Determine the effect on Globe Inc.'s ROI if South introduces the new product line. Would the top managers of Globe Inc. want to introduce the new product line? b. ROI of new product: 16%

FINANCIAL ACCOUNTING
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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Compare ROI st y calculations. *P11.55B (LO 4, 5) South division had the following results for the year just ended: Sales Contribution margin $1,500,000 Controllable $120,000 margin 600,000 Average operating assets South is considering a new product line that would involve the following: Sales $300,000 Controllable margin 600,000 Contribution 120,000 Average margin operating assets $ 24,000 150,000 South's parent company, Globe Inc., has a company-wide ROI of 14% and pays bonuses based on divisional ROI. Instructions a. Determine the effect on South's ROI if it introduces the new product line. Would South's managers be encouraged to introduce the new product line? b. Determine the effect on Globe Inc.'s ROI if South introduces the new product line. Would the top managers of Globe Inc. want to introduce the new product line? b. ROI of new product: 16%
Transcribed Image Text:Compare ROI st y calculations. *P11.55B (LO 4, 5) South division had the following results for the year just ended: Sales Contribution margin $1,500,000 Controllable $120,000 margin 600,000 Average operating assets South is considering a new product line that would involve the following: Sales $300,000 Controllable margin 600,000 Contribution 120,000 Average margin operating assets $ 24,000 150,000 South's parent company, Globe Inc., has a company-wide ROI of 14% and pays bonuses based on divisional ROI. Instructions a. Determine the effect on South's ROI if it introduces the new product line. Would South's managers be encouraged to introduce the new product line? b. Determine the effect on Globe Inc.'s ROI if South introduces the new product line. Would the top managers of Globe Inc. want to introduce the new product line? b. ROI of new product: 16%
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