Detailed Answer
Answer (B) is correct.
The $4,500 favorable variance for the indirect materials is the spending
variance. This is the difference between actual variable overhead and the
product of the budgeted application rate and the actual amount of the
allocation base. Since the variance is favorable, the actual cost was less
than the budgeted cost. Thus, the $4,500 favorable variance is calculated
as follows: $(4,500) = (Actual cost × Actual quantity) – (Budgeted cost ×
Actual quantity), or $(4,500) = (X × 19,700) – ($2.15 × 19,700). By
solving for X, we get an actual cost of $1.92:
(4,500) = 19,700X – 42355
37,855 = 19,700X
1.92 = X