Hannifin manufactures hydraulic motors. Both variable and fixed overhead are allocated based on direct labor hours. The budgeted manufacturing overhead costs per unit (motor) and based on direct labor hours are shown below:

Cost/ Unit Variable overhead (8 hours @ $42 per direct manufacturing labor hour) $336

Fixed overhead (8 hours @ $75 per direct manufacturing labor hour) 600

Total overhead per unit $936

The following information is available for the current period:

12,000 motors were produced. The budget production was 10,000 motors.

101,000 direct manufacturing labor hours were worked at a total direct labor cost of $4,545,000.

Actual variable manufacturing overhead costs equaled $4,655,000.

Actual fixed manufacturing overhead costs equaled $6,820,000.

1. Compute a three-column variance analysis of Hannifins variable manufacturing overhead including variance descriptions.

2. Compute a three-column variance analysis of Hannifins fixed manufacturing overhead including variance descriptions.

3. Discuss an important insight about Hannifins Fixed Costs and Infrastructure based on the Production Volume Variance and the results of your financial analysis above.