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See questions 1 - 3 in image Question 4: If you were in Dell Havasi's position, would you accept or reject the new product? Question 5: Would the new line increase or decrease the company's

See questions 1 - 3 in image Question 4: If you were in Dell Havasi's position, would you accept or reject the new product? Question 5: Would the new line increase or decrease the company's

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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See questions 1 - 3 in image

Question 4: If you were in Dell Havasi's position, would you accept or reject the new product?

Question 5: Would the new line increase or decrease the company's overall ROI?

"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 Variable expenses Contribution margin. Fixed expenses Net operating income. Divisional average operating assets 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 $2,326,200. The cost and revenue characteristics of the new product line per year would be: Sales Variable expenses Fixed expenses $ 21,600,000 13,622,600 7,977,400 6,010,000 $ 1,967,400 $ 4,499,200 $9,300,000 65% of sales $ 2,557,400
Transcribed Image Text:"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 Variable expenses Contribution margin. Fixed expenses Net operating income. Divisional average operating assets 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 $2,326,200. The cost and revenue characteristics of the new product line per year would be: Sales Variable expenses Fixed expenses $ 21,600,000 13,622,600 7,977,400 6,010,000 $ 1,967,400 $ 4,499,200 $9,300,000 65% of sales $ 2,557,400
Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 5 Req 4 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 produ 3. Compute the Office Products Division's margin, turnover, and ROI for next year assi year and adds the new product line. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Req 6A to 6C 1. ROI for this year 2. ROI for the new product line by itself 3. ROI for next year Req 6D % % %
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 5 Req 4 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 produ 3. Compute the Office Products Division's margin, turnover, and ROI for next year assi year and adds the new product line. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Req 6A to 6C 1. ROI for this year 2. ROI for the new product line by itself 3. ROI for next year Req 6D % % %
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