Westerville Company reported the following results from last year's operations:
|
| Sales |
$ |
1,200,000 |
| Variable expenses |
|
320,000 |
|
|
|
| Contribution margin |
|
880,000 |
| Fixed expenses |
|
640,000 |
|
|
|
| Net operating income |
$ |
228,000 |
|
|
|
| Average operating assets |
$ |
600,000 |
|
|
|
|
|
This year the company has a $150,000 investment opportunity with the following cost and revenue characteristics:
|
|
| Sales |
$ |
240,000 |
|
| Contribution margin ratio |
|
50 |
% of sales |
| Fixed expenses |
$ |
84,000 |
|
|
|
|
The company's minimum required rate of return is 15%.
|
|
|
If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?
|
| show work. |