Answer (D) is correct . Total manufacturing cost of $2,500,000 is composed of raw materials, direct labor, and factory overhead. Factory overhead is 30% of total manufacturing costs, or $750,000. If factory overhead is 80% of direct labor cost, direct labor cost is $937,500 ($750,000 ¡Â 80%).Answer (A) is incorrect because The amount of $750,000 equals the factory overhead.
Answer (B) is incorrect because The amount of $600,000 is calculated by multiplying factory overhead of $750,000 by 80%.
Answer (C) is incorrect because The amount of $909,375 is calculated by applying 30% to costs of goods manufactured, not total manufacturing costs, to determine factory overhead.
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Farber Company’s total direct labor cost for the year is