Calculating Residual Income

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

Sales	$531,250
Cost of goods sold	280,000
Gross margin	$251,250
Selling and administrative expense	186,600
Operating income	$64,650
Less: Income taxes (@ 40%)	25,860
Net income	$38,790

At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. East Mullett requires a minimum rate of return of 10%.

Required:

For East Mullett, calculate:

2. Residual income

$