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All Canadians have government-funded health insurance, which pays for any medical care they require. However, when traveling out of the country, Canadians usually acquire supplementary health insurance to cover the difference between the costs incurred for emergency treatment and what the government program pays. In the United States, this cost differential can be prohibitive. Until recently, private insurance companies (such as BlueCross BlueShield) charged everyone the same weekly rate, regardless of age. However, because of rising costs and the realization that older people frequently incur greater medical emergency expenses, insurers had to change their premium plans. They decided to offer rates that depend on the age of the customer. To help determine the new rates, one insurance company gathered data concerning the age and mean daily medical expenses of a random sample of 1,348 Canadians during the previous 12-month period. What does the statistic calculated in part (a) tell you?
Which of the following statements about nonverbal expression is true? a. People blind from birth cannot exhibit common facial expressions. b. The meaning of gestures is the same across cultures. c. Facial signs of emotion are generally understood across world cultures. d. People from different cultures have difficulty understanding nonverbal expressions. e. Nonverbal expression is not reliably interpreted within a culture.
“I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company’s Office Products Division for the most recent year are given below:
The company had an overall return on investment (ROI) of 15% last year (considering all divisions). The Office Products Division has an opportunity to add a new product line that would require an additional investment in operating assets of $1,000,000. The cost and revenue characteristics of the new product line per year would be:
Sales$2,000,000 Variable expenses 60% of sales Fixed expenses $640,000
Compute the Office Products Division’s ROI for the most recent year; also compute the ROI as it would appear if the new product line is added.
If you were in Dell Havasi’s position, would you accept or reject the new product line? Explain.
Why do you suppose headquarters is anxious for the Office Products Division to add the new product line?
Suppose that the company’s minimum required rate of return on operating assets is 12% and that performance is evaluated using residual income.
a. Compute the Office Products Division’s residual income for the most recent year; also compute the residual income as it would appear if the new product line is added.
b. Under these circumstances, if you were in Dell Havasi’s position, would you accept or reject the new product line? Explain.