Wilson Enterprises applies overhead based on direct labor cost. The company estimates that their overhead for the year will be $240,000, and direct labor cost to be $300,000. Actual direct labor cost for Martinez Manufacturing was $280,000 and actual overhead costs were $220,000. At the end of the year, manufacturing overhead was:

1. Overapplied by $20,000.

2. Underapplied by $20,000.

3. Overapplied by $4,000.

4. Underapplied by $4,000.