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 %