Factory Overhead Calculation, Allocation, and Analysis Red Wing Company applies factory overhead based on direct labor costs. The company incurred the following costs during 2011: direct materials costs, $637,500; direct labor costs, $2,500,000; and factory overhead costs applied, $1,000,000. 1. Assuming that the companys $57,000 ending Goods in Process Inventory account for year 2011 had $18,000 of direct labor costs, determine the inventorys direct materials costs