The office products division has an opportunity to add a

Reference no: EM13569276

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 the most recent year are given below:


Sales	$24,000,000
Variable expenses	15,416,000
Contribution margin	8,584,000
Fixed expenses	6,784,000
Net operating income	$1,800,000
Divisional operating assets	$6,000,000

The company had an overall return on investment (ROI) of 15% last year (considering all divisions). The Office Products Division has an opportunity to add a new product line that would require an additional investment in operating assets of $2,650,000. The cost and revenue characteristics of the new product line per year would be:


Sales	$7,685,000
Variable expenses	60% of sales
Fixed expenses	$2,551,420

Requirement 1:

Compute the Office Products Division's ROI for the most recent year; also compute the ROI as it would appear if the new product line is added.(Round interim calculations and final answers to 2 decimal places. Omit the "%" sign in your response.)

	ROI
Present	%
New Line	%
Total for company	%

Reference no: EM13569276

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