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10 Check my work Problem 11-18 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2 "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 ROls. Operating results for the company's Office Products Division for this year are given below Sales $22,100,000 Variable bxpenses 13 893,400 8,206,600 Contribution margin Pixed expenses Net operating incone 6,085,000 Divisional average operating assets 5.200,000 The company had an overall return on investment (RO) 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 $2,387,500. The cost and revenue characteristics of the new product line per year would be: Sales variable expenses Fixed expenses 9,550,000 65% of sales $2,578,500 Required: