1 know I make any move Our divisions return on investment RO

\"1 know I make any move. Our division\'s return on investment (ROI has led the company for given to the divisional managers who have the highest ROls. Operating results for the company\'s Office s21,200,000 13,405,600 ,950,000 had an overall return on in operating assets by $2,600,000. The cost and revenue characteristics of the new product line per year would be: product line

Solution

(1) Office Product Division ROI for this year :-

Sales

21200000

Net Operating income

1844400

Operating Assets

4240000

Margin (1844400/21200000) * 100

8.7%

Turnover (21200000/4240000)

5

ROI (8.7% * 5)

43.5%

(2) Office Product Division ROI for the new product line :-

Sales

9100000

Net Operating income (9100000 * 35%) - 2538900

646100

Operating Assets

2600000

Margin (646100/9100000) * 100

7.1%

Turnover (91000000/2600000)

3.5

ROI (7.1% * 3.5)

24.85%

(3) Total in next year :-

Sales

30300000

Net Operating income

2490500

Operating Assets

6840000

Margin (2490500/30300000) * 100

8.22%

Turnover (30300000/6840000)

4.43

ROI (8.22% * 4.43)

36.41%

1. ROI for this year

43.5%

2. ROI for the new product line

24.85%

3. ROI for the next year

36.41%

(4) REJECT

(5) Adding the new line would increase the company’s Overall ROI

(6)Residual Income:-

1. Residual Income for this year (43.5% - 16%) * 4240000

1166000

2. Residual Income for the new product line (24.85% - 16%) * 2600000

230100

3. Residual Income for next year (36.41% - 16%) * 6840000

1396044

(6) (d) Accept the Order

Sales	21200000
Net Operating income	1844400
Operating Assets	4240000
Margin (1844400/21200000) * 100	8.7%
Turnover (21200000/4240000)	5
ROI (8.7% * 5)	43.5%