The manager of ABC Co. is preparing the budget for the upcoming year. At this point, he has determined that average total assets for the upcoming year will equal $4,000,000. The manager is evaluated on the amount of residual income generated by the division. Assume variable costs in the Richmond Division are expected to equal 60% of total sales and fixed costs are expected to equal $400,000.

a.	Compute the sales level that would generate a 20% return on investment.
b.	Assuming the rate of return is 15%, determine the level of sales that would generate $200,000 of residual income.