question archive $ Compare ROI and residual income with supporting calculations
$ Compare ROI and residual income with supporting calculations
Subject:BusinessPrice: Bought3
$ Compare ROI and residual income with supporting calculations. *P11.55B (LO 4, 5) South division had the following results for the year just ended: Sales $1,500,000 Controllable margin $120,000 Contribution 600,000 Average operating 600,000 margin assets South is considering a new product line that would involve the following: Sales $300,000 Controllable margin 24,000 Contribution 120,000 Average operating 150,000 margin assets South's parent company, Globe Inc., has a company-wide ROI of 14% and pays bonuses based on divisional ROI. Instructions a. Determine the effect on South's ROI if it introduces the new product line. Would South's managers be encouraged to introduce the new product line? b. Determine the effect on Globe Inc.'s ROI if South introduces the new product line. Would the top managers of Globe Inc. want to introduce the new product line? b. ROI of new product: 16%
