*P11.55B (LO 4, 5) South division had the following results for the year just ended: Sales $1,500,000 Controllable $120,000 margin Contribution margin 600,000 Average operating assets Contribution margin South is considering a new product line that would involve the following: Sales 600,000 $300,000 Controllable margin 120,000 Average operating assets $ 24,000 150,000 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%

*P11.55B (LO 4, 5) South division had the following results for the year just ended: Sales $1,500,000 Controllable $120,000 margin Contribution margin 600,000 Average operating assets Contribution margin South is considering a new product line that would involve the following: Sales 600,000 $300,000 Controllable margin 120,000 Average operating assets $ 24,000 150,000 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%

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 37P: Katayama Company produces a variety of products. One division makes neoprene wetsuits. The divisions...

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