Please help me with 6a, b, and c. Thank you! "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:$ 21,408, eeeSalesVariable expensesContribution marginFixed expensesNet operating incomeDivisional average operating assets13,515,4007,884, 6005,980.001,984, 6005,358, e00%24The company hsd an overall return on investment (ROI) of 16.00% 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 $2,875,000. The cost and revenue characteristics of the new product line per year would be:SalesVariable expensesFixed expenses$9,200,00065% of sales$2,548,400Required:1. Compute the Office Products Division's margin, turnover, and ROI for this year.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, end ROl 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 sccept 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 assets is 13% 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 assuming that it performs the same es this year and edds 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 3Reg 4Req 5Req 6A to 60Req 601. Compute the orrice Products Division's margin, turnover, and ROI for this year.2. Compute the Oorrice 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 next year< Req 1 to sReq 4 >

Residual income is a financial metric that measures the income a company or individual earns after…

"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 wholessler with five autonomous divisions. The divisions are evalusted on the basis of ROL, 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 Net operating incone Divisional average operating assets 21,400, 000 13,515,400 7,884, G0 S,980,000 1,904, 600 5,150, 000 The company had an overall return on investment (ROI) of 16.00% 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 $2,875.000. The cost and revenue characteristics of the new product line per year would be: Sales Variable expenses Fixed expenses $9,200,000 GSX of sales $2, 548, 400 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 assuming that it performs the same as this year and odds the new product line. 4. If you were in Dell Havasi's position, would you accept or reject the new product line? 5. Why do you suppose headquarters 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 assets is 13% and that performance is evaluated using residual 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 assuming that it performs the same as this year and adds the new product line. d. Using the residual income approach, if you were in Dell Havasi's position, would you accept or reject the new product line?

"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 wholessler with five autonomous divisions. The divisions are evalusted on the basis of ROL, 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 Net operating incone Divisional average operating assets 21,400, 000 13,515,400 7,884, G0 S,980,000 1,904, 600 5,150, 000 The company had an overall return on investment (ROI) of 16.00% 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 $2,875.000. The cost and revenue characteristics of the new product line per year would be: Sales Variable expenses Fixed expenses $9,200,000 GSX of sales $2, 548, 400 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 assuming that it performs the same as this year and odds the new product line. 4. If you were in Dell Havasi's position, would you accept or reject the new product line? 5. Why do you suppose headquarters 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 assets is 13% and that performance is evaluated using residual 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 assuming that it performs the same as this year and adds the new product line. d. Using the residual income approach, if you were in Dell Havasi's position, would you accept or reject the new product line?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 36P: Dantrell Palmer has just been appointed manager of Kirchner Glass Products Division. He has two...

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