Detailed Answer
Answer (B) is correct. The $144,000 annual amount equals $12,000 per month. Since volume is expected to be 5,000 units per month, and the $12,000 is considered a variable cost, budgeted cost per unit is $2.40 ($12,000 ÷ 5,000 units). If 4,500 units are produced, the total variable costs should be $10,800 (4,500 units × $2.40). Subtracting the $10,100 of actual costs from the budgeted figure results in a favorable variance of $700.