Easel has fixed overhead costs of $2.50 per unit at an anticipated production level of 1400 units. In July, Easel incurred actual fixed overhead costs of $3700 and actually produced 1100 units.

What is Easel's fixed overhead volume variance in July?

A. $200.00 unfavorable
B. $200.00 favorable
C. $750.00 unfavorable
D. $750.00 favorable

We can calculate Easel's expected fixed overhead costs for July using the following formula:
Expected Fixed Overhead Costs = Head Costs per Unit x Anticipated Production Level
Expected Fixed Overhead Costs = $2.50 x 1400 = $3500
We can then calculate Easel's fixed overhead volume variance using the following formula:
Fixed Overhead Volume Variance = (Actual Production - Expected Production) x Head Costs per Unit
Fixed Overhead Volume Variance = (1100 - 1400) x $2.50
Fixed Overhead Volume Variance = -300 x $2.50
Fixed Overhead Volume Variance = -$750
Since the actual fixed overhead costs incurred were $3700 and the expected fixed overhead costs were $3500, we can also calculate Easel's fixed overhead spending variance:
Fixed Overhead Spending Variance = Actual Fixed Overhead Costs - Expected Fixed Overhead Costs
Fixed Overhead Spending Variance = $3700 - $3500
Fixed Overhead Spending Variance = $200 favorable

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