LaserLife Printer Cartridge Company Is a Decentralized Organization with Several

question 46

Essay

LaserLife Printer Cartridge Company is a decentralized organization with several autonomous divisions. The division managers are evaluated, in part, on the basis of the change in their return on invested assets. Operating results for the Packer Division for 2018 are budgeted as follows:

Operating assets for the division are currently $3,600,000. For 2018, the division can add a new product line for an investment of $600,000. The new product line will generate sales of $1,600,000 and will incur fixed expenses of $600,000 annually. Variable costs of the new product will average 60% of the selling price.
Required:
a.What is the effect on ROI of accepting the new product line?
b.If the company's required rate of return is 6% and residual income is used to evaluate managers, would this encourage the division to accept the new product line? Explain and show computations.

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Definitions:

Breathing

The process of inhaling and exhaling air to facilitate gas exchange with the internal environment, primarily by bringing in oxygen and flushing out carbon dioxide.

Blood Flow

The continuous movement of blood through the circulatory system, delivering nutrients and oxygen to, and removing waste products from, tissues and organs.

Magnetic Resonance Imaging

A non-invasive imaging technique that uses strong magnetic fields and radio waves to generate detailed images of the inside of the body, especially useful for soft tissues.

Positron Emission Tomography

A medical imaging technique that uses radioactive tracers to visualize and measure changes in metabolic processes.