Student Name:

Class: Bus-212
Problem 11-14
KIRSI PRODUCTS
1: East Division's ROI for last year
Net operating income for new product line:
Sales
Variable expenses
Contribution Margin
Fixed expenses
Net operating income

Sales
Net operating income
Operating assets
Margin
Turnover
ROI

$
$
$

9,000,000
5,850,000
3,150,000
2,520,000
630,000
Correct!
Present
New Line
21,000,000 $
9,000,000 $
1,680,000 $
630,000 $
5,250,000 $
3,000,000 $
8.0%
7.0%
4.00
3.00
32%
21%
Correct!
Correct!

Total
30,000,000
2,310,000
8,250,000
7.7%
3.63
28%
Correct!

Present
New Line
5,250,000 $
3,000,000 $
15%
15%
787,500 $
450,000 $

Total
8,250,000
15%
1,237,500

4a: East Division's residual income for last year

Operating assets
Minimum required return
Minimum net operating income

Actual net operating income

Minimum net operating income
Residual income

1,680,000
787,500
892,500
Correct!

$
$

630,000
450,000
180,000
Correct!

$
$

2,310,000
1,237,500
1,072,500
Correct!

Given Data P11-14:

KIRSI PRODUCTS
Last years' operating results for East Division:
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income
Divisional operating assets
Additional information:
Overall company ROI last year
Investment needed for new product line
Revenue characteristics for new product line:
Sales
Variable expenses as a percent of sales
Fixed expenses

$
$

21,000,000
13,400,000
7,600,000
5,920,000
1,680,000
5,250,000

18%
3,000,000

$
$

9,000,000
65%
2,520,000