Delta Tool and Die, Inc. manufactures dies, molds, and machine tools. It has a Northern Division and a Southern Division. After reviewing the segmented income statements for both divisions, you have determined that the Northern Division has an operating income of $1,114 and average operating assets of $9,600 while the Southern Division has an operating income of $3,286 and average operating assets of $41,600. Assuming the cost of capital is 6%, what is the residual income (RI) for each division?

Question 1 options:

1. Southern Division, RI $790; Northern Division, RI $538
2. Southern Division, RI $890; Northern Division, RI $1,150
3. Southern Division, RI $795; Northern Division, RI $596
4. Southern Division, RI $538; Northern Division, RI $790