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I know headquarters wants us to add that new product line, said Dell Havasi, manager of Billings Companys Office Products Division. But I want to see the numbers before I make any move. Our divisions return on investment (ROI) has led the company for three years, and I dont 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 ROIs. Operating results for the companys Office Products Division for this year are given below:

Sales	$	21,500,000
Variable expenses		13,565,000
Contribution margin		7,935,000
Fixed expenses		5,995,000
Net operating income	$	1,940,000
Divisional average operating assets	$	4,301,500

The company had an overall return on investment (ROI) of 17.00% 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 $2,313,700. The cost and revenue characteristics of the new product line per year would be:

Sales	$9,255,000
Variable expenses	65% of sales
Fixed expenses	$2,552,650

1. ROI for this year % 2. ROI for the new product line by itself % 3. ROI for next year %

	1. Residual income for this year 2. Residual income for the new product line by itself 3. Residual income for next year

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