Strayer Company, which uses a fully integrated standard cost system, had budgeted the following sales and costs for 20X5:

At the end of 20X5 Strayer Company reported production and sales of 19,200 units. Total factory overhead incurred was exactly equal to budgeted factory overhead for 20X5 and there was underapplied total factory overhead of \(\$ 2,000\) at December 31, 20X5. Factory overhead is applied to the work-in-process inventory on the basis of standard direct labor hours allowed for units produced. Also, there was favorable direct labor efficiency variance, but no direct labor rate variance and no raw material variances for \(20 \mathrm{X} 5\).
Explain why factory overhead was underapplied by \(\$ 2,000\), and being as specific as the data permit, indicate which overhead variances may have been affected. Strayer uses a three variance method of analyzing the total factory overhead variance; the three variances are (1) spending variance, (2) efficiency variance, and (3) volume variance.

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Unit Sales....... 20,000 Sales...... $200,000 Total production costs at standard cost. .130,000 Gross Margin........ 70,000 Beginning inventories.. ...none Ending inventories...... ..none