Wuhan Companys costing system has two direct-cost categories: Direct Materials and Direct Labor. Management evaluates the Direct Materials Department by keeping purchases separate from production for variance analysis purposes. Manufacturing overhead (both variable and fixed) is allocated on the basis of Direct Labor-hours.

Budget (standard) amounts for the current period are as follows: Budget (Standard) Amount / Input Direct Materials 2 lbs. at $7.50 per lb. Direct Labor 1.30 hrs. at $25 per hr. Variable Mfg. Overhead $ 105,300 Fixed Mfg. Overhead $ 35,100 Units 4,500 Wuhans

Actual results for the current period are as follows: Direct materials purchased 8,000 lbs. Direct materials used in production 9,100 lbs. Direct materials cost $7.75 / lb. Direct labor rate $27.50 per hour Direct labor cost $199,375 Variable overhead rate $20.00 / DL Hour Fixed overhead cost $40,000 Units produced 5,000 units

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

b. Compute a three-column variance analysis of fixed manufacturing overhead including variance descriptions. Indicate if FOH is over or under allocated.

c. Provide an important insight about the Production Volume Variance based on the results of your financial analysis above.