Joe Smith has owned and operated Smith's Tool and Die for 40 years.Currently, he is only making one part, RL-5 which is a small electricial relay.He has a 2-year contract to provide 30,000 parts per month to Ford Motor. Unfortunately, Joe got quite sick and his son, Mike, has had to come in and run the business.Mike is disappointed when he finds the following monthly information about the RL-5 part:

Per unit 30,000 units Sales Price: $ 22.00 660,000

Variable manufacturing costs $14.00 420,000

Variable selling costs $ 2.00 60,000

Fixed manufacturing overhead 150,000

Fixed administrative/selling costs 60,000

Operating income (30,000)

Smith's Tool and Die has the capacity to produce 100,000 units of the RL-5 part per month.

Mike can pay Ford a non-performance fee and sell the assets of the business.The fee is 10% of the sales revenue for one year.Mike has received an offer from Tony who will pay $1,200,000 for the assets.Tony plans to sell what assets he can, demolish the building and build condos on the land.The current net book value of the assets is $200,000. Assume that Smith's tax rate on the gain is 21%.