“I know headquarters wants us to add that new product line,” said Fred Halloway,

“I know headquarters wants us to add that new product line,” said Fred Halloway, manager of Kirsi Products’ East Division. “But I want to see the numbers before I make a move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Kirsi Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to divisional managers who have the highest ROI. Operating results for the company’s East Division for last year are given below:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $21,000,000
Variable expenses . . . . . . . . . . . . . . . 13,400,000
Contribution margin . . . . . . . . . . . . . . 7,600,000
Fixed expenses . . . . . . . . . . . . . . . . . . 5,920,000
Net operating income . . . . . . . . . . . . $ 1,680,000.................................................................................................................



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