Small Budget Production Company uses a predetermined overhead rate based upon direct labour hours. The firm had the following budgeted and actual data for the current year:

Budgeted factory overhead cost Actual factory overhead cost Budgeted direct labour hours Actual direct labour hours

$5000 $6000 1000 1000

What was the amount of under- or over-applied overhead for the year?

Select one:

1. $500 overapplied

2. $500 underapplied

3. $1000 underapplied

4. $1000 overapplied

5. None of the above