West Mullet Manufacturing earned operating income last year as shown in the following income statement:

SalesP3,750,000

Cost of goods sold2,250,000

Gross margin1,500,000

Selling and administrative expenses1,200,000

Operating income300,000

Less:Income tax (@40%)120,000

Net incomeP180,000

At the beginning of the year, the value of operating assets was P1,600,000.At the end of the year, the value of operating assets was P1,400,000.

1.Calculate the average operating assets and residual income if West Mullet requires a minimum rate of return of 5%.

2.Calculate the EVA for West Mullet assuming that the total capital employed equaled P1,200,000 and that the actual cost of capital is 4%.