Refer to the information for Barnard Manufacturing on the previous page. Barnard requires a minimum rate of return of 15%.

Barnard Manufacturing earned operating income last year as shown in the following income statement:

Sales...............................................$4,000,000

Cost of goods sold................................2,100,000

Gross margin......................................$1,900,000

Selling and administrative expense.............1,100,000

Operating income.................................$ 800,000

Less: Income taxes (@ 40%)......................320,000

Net income........................................$ 480,000

At the beginning of the year, the value of operating assets was $2,700,000. At the end of the year, the value of operating assets was $2,300,000.

Required:

Calculate

(1) Average operating assets

(2) Residual income.