Giordano Chocolates had budgeted to produce 40,000 units with fixed overhead applied at a rate of $2.10 per unit. Actual production was 42,000 units with actual fixed overhead costs incurred equal to $82,500. Giordano Chocolates reported a favourable volume variance in the amount of $4,200. Based on this information, which of the following statements is true?

• The variance should have been reported as $5,700 favourable.
• The variance should have been reported as unfavourable as more fixed overhead costs were used and applied than was budgeted for.
• The variance should have been reported as $1,500 favourable.
• The variance is favourable because Giordano has effectively used its available capacity.