???????????????????????????????????????? ????Units?????????????????????????? ?$
High activity??????????????????????? 3,000??????? ????????????? 12,900
Low activity???? ?????????????????? ?2,000????????????????????? 11,100
Increase????????????????????????????? 1,000???????????????????? ?1,800
Variable cost per unit =$1,800/1,000=$1.80 per unit
Fixed cost, substituting in high activity = $12,900 - (3,000 x $1.80) =$7,500
Budget cost allowance for 4,000 units:????????????????????????????????????????????????????? $
Variable cost (4,000 x $1.80)???????????????????????????????????????????????????????????????? 7,200
Fixed cost???????????????????????????????????????????????????????????????????????????????????????????????7,500
?????????????????????????????????????????????????????????????????????????????????????????????????????????????? 14,700
Option A is the variable cost allowance only and option B is the fixed cost allowance only. If you selected option C your variable cost per unit calculation was upside down ($1,000/1,800 instead of $1,800/1,000