What is the residual income for each division

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Question - 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?

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

Reference no: EM133180527

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