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why is 1.0 and 1.25 used in the direct labor + overhead section of the response feedback? Randall Company manufactures products to customer specifications. A

why is 1.0 and 1.25 used in the direct labor + overhead section of the response feedback?
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Randall Company manufactures products to customer specifications. A job costing system is used to accumulate production costs. Factory overhead cost was applied at 125% of direct labor cost. Selected data concerning the past year's operation of the company are presented below. January 1 December 31 Direct materials $77,000 $40,000 Work in process 66,000 42,000 Finished goods 115,000 100,000 Other information Direct materials purchases $324,000 Cost of goods available for sale 950,000 Actual factory overhead costs 260,000 The amount of underapplied or overapplied overhead is: Selected Answer: $10,000 underapplied. Answers: $60,000 overapplied. $60,000 underapplied. $10,000 overapplied. $0. $10,000 underapplied. Response Applied overhead = 1.25 x direct labor, so find direct labor as Feedback: follows: Direct labor and overhead = $450,000 = $835,000 + $42,000 - $66,000 - $361,000 Direct labor + overhead = (1.0 x direct labor) + (1.25 x direct labor) = $450,000 [$450,000 = 2.25] = $200,000 = Direct labor $450,000 - $200,000 = $250,000 = overhead Or, direct labor x 1.25 direct labor = overhead $200,000 x 1.25 = $250,000 Underapplied overhead = $260,000 - $250,000 = $10,000 underapplied

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