Variable production cost per unit = (15,120 – 11,280)/(10,000– 6,000) = 3,840/4,000 = $0·96
Fixed cost = 11,280 – (6,000 x 0·96) = $5,520
85% capacity = 8,500 units.
Flexible budget allowance for 8,500 units = $5,520 + (8,500 x 0·96) = $13,680
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