[The following information applies to the questions displayed below.]

Westerville Company reported the following results from last years operations:

Sales	$	2,000,000
Variable expenses		640,000
Contribution margin		1,360,000
Fixed expenses		860,000
Net operating income	$	500,000
Average operating assets	$	1,250,000

At the beginning of this year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics:

Sales	$	400,000
Contribution margin ratio		70	% of sales
Fixed expenses	$	220,000

The companys minimum required rate of return is 10%.

11. What is last years residual income?

[The following information applies to the questions displayed below.]

Westerville Company reported the following results from last years operations:

Sales	$	2,000,000
Variable expenses		640,000
Contribution margin		1,360,000
Fixed expenses		860,000
Net operating income	$	500,000
Average operating assets	$	1,250,000

At the beginning of this year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics:

Sales	$	400,000
Contribution margin ratio		70	% of sales
Fixed expenses	$	220,000

The companys minimum required rate of return is 10%.

12. What is the residual income of this years investment opportunity?

[The following information applies to the questions displayed below.]

Westerville Company reported the following results from last years operations:

Sales	$	2,000,000
Variable expenses		640,000
Contribution margin		1,360,000
Fixed expenses		860,000
Net operating income	$	500,000
Average operating assets	$	1,250,000

At the beginning of this year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics:

Sales	$	400,000
Contribution margin ratio		70	% of sales
Fixed expenses	$	220,000

The companys minimum required rate of return is 10%.

13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?