Calculating Residual Income East Mullett Manufacturing earned operating income last year as shown in the following income statement: Sales Cost of goods sold $3,750,000 2,250,000 $1,500,000 1,200,000 300,000 120,000 $180,000 Gross margin Selling and administrative expense Operating income Less: Income taxes (@ 40%) Net income At the beginning of the year, the value of operating assets was $1,600,000. At the end of the year, the value of operating assets was $1,400,000. East Mullett requires a minimum rate of return of 5%. Required: For East Mullett, calculate: 1. Average operating assets$ 2. Residual income