1 ZYX Inc. makes a single product and uses a standard cost system. Variable overhead is applied on the basis of direct labor hours. The following information is given: Standard costs per unit: Raw materials (1.5 grams at $16 per gram) $24.00 Direct labor (0.75 hours at $8 per hour) $6.00 Variable overhead (0.75 hours at $3 per hour) $2.25 Actual experience for current year: Units produced 22,400 units Purchases of direct materials (21,000 grams at $17 per gram) $357,000 Direct materials used 33,400 grams Direct labor (16,750 hours at $8 per hour) $134,000 Variable overhead cost incurred $48,575 REQUIRED: Compute the following variances (each worth 2.5 points): a. Direct materials price variance. b. Direct materials quantity variance. c. Direct labor rate variance. d. Direct labor efficiency variance. e. Variable overhead spending variance f. Variable overhead efficiency variance g. Which variances would you investigate, and why? 3 points PROBLEM 2 Segment reporting (8 points) Health Solutions provides three types of client services in the health-care industry. Its March income statement is as follows: Sales $900,000 Variable costs (605,000) Contribution margin 295,000 Fixed Expenses: Service (70,000) Selling, general and administrative (65,000) Net operating income $160,000 Other information for the three types of services is as follows: Hospitals Physicians Nursing Care Sales $350,000 $250,000 $300,000 Contribution margin ratio 30% 40% 30% Direct fixed expenses of services $20,000 $18,000 $16,000 Allocated common fixed services expenses $1,000 $1,000 $1,500 Required: Prepare an income statement segment by client categories, including a column for the total company. Assess the health of the three segments (in 50 words or less) Transfer pricing Division X makes a component that it sells externally for $54 and can also sell internally to Division Z. The variable cost associated with producing one unit = $30. Division Z currently buys all of its 10,000 units in the external market at the cost of $50 per unit. REQUIRED: a. Calculate the floor and ceiling transfer prices if Division X is currently producing and selling at its full capacity of 100,000 units. Should the transfer be made? If the transfer is made, what is the effect on total company NOI? b. Calculate the floor and ceiling transfer prices if Division X has 12,000 units of excess capacity. Should the transfer be made? If the transfer is made, what is the effect on total company NOI