Calculating Residual Income

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

Sales		$4,400,000
Cost of goods sold		2,600,000
Gross margin		$1,800,000
Selling and administrative expense		1,200,000
Operating income		$600,000
Less: Income taxes (@ 40%)		240,000
Net income		$360,000

At the beginning of the year, the value of operating assets was $1,700,000. At the end of the year, the value of operating assets was $1,300,000. East Mullett requires a minimum rate of return of 9%.

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

Required:

For East Mullett Manufacturing, calculate the following:

1.	Average operating assets.
	$fill in the blank 2
2.	Residual income.
	$fill in the blank 3

Calculating Average Operating Assets, Margin, Turnover, and Return on Investment

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

Sales		$3,650,000
Cost of goods sold		2,150,000
Gross margin		$1,500,000
Selling and administrative expense		1,200,000
Operating income		$300,000
Less: Income taxes (@ 40%)		120,000
Net income		$180,000

At the beginning of the year, the value of operating assets was $1,300,000. At the end of the year, the value of operating assets was $900,000

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

Required:

For East Mullett Manufacturing, calculate the following:

1.	Average operating assets.
	$fill in the blank 2
2.	Margin. Round your answer to two decimal places.
	fill in the blank 3%
3.	Turnover. Round your answer to two decimal places.
	fill in the blank 4
4.	Return on investment. Do not round intermediate calculations. Round your answer to two decimal places.
	fill in the blank 5%