Dunkins Corporation is a barrel refurbishment company that measures its output by the number of barrels refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes.

Williams Inc. reported the following results from last year's operations:

	Sales	$13,200,000
	Variable expenses	8,490,000
	Contribution margin	4,710,000
	Fixed expenses	3,654,000
	Net operating income	$1,056,000
	Average operating assets	$6,000,000

At the beginning of this year, the company has a $1,000,000 investment opportunity with the following characteristics:

	Sales	$3,400,000
	Contribution margin ratio	50%	of sales
	Fixed expenses	$1,496,000

The company's minimum required rate of return is 17%.

Required:

1. What was last year's residual income? Show your work!

2. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall residual income this year? Show your work!

When the company prepared its planning budget at the beginning of October, it assumed that 22 barrels would have been refurbished.

Required:

Prepare the company's planning budget for October. Show your work!