The Scottish firm of Cullen and MacNeil produces a single product and uses a standard costing system to help control costs. Manufacturing overhead is applied to production on the basis of standard machine-hours. The Scottish currency is the British pound. According to the company's flexible budget, the following overhead costs should be incurred at an activity level of 18,000 machine- hours (the denominator activity level chosen for the year): Variable manufacturing overhead cost Fixed manufacturing overhead cost Total manufacturing overhead cost 27,000 54,000 81,000 During the year, the following operating results were recorded: Actual machine-hours worked Standard machine-hours allowed Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 15,000 16,000 24,000 52,000 At the end of the year, the company's manufacturing overhead account contained the following data: Actual costs Manufacturing Overhead 76,000 Applied costs. 72,000 4,000 Management would like to determine the cause of the 4,000 underapplied overhead.