Martinez Manufacturing applies overhead based on direct labor hours. The company estimates that their overhead for the year will be $180,000, and that they will use 72,000 direct labor hours. During the year, Martinez Manufacturing actually used 75,000 direct labor hours and actual overhead costs were $190,000. At the end of the year, manufacturing overhead was:

Overapplied by $2,500.

Overapplied by $10,000.

Underapplied by $2,500. Underapplied by $10,000.