Sterling Manufacturing uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The company estimated its manufacturing overhead at $320,000 for the year and direct labor hours at 80,000 hours. Actual manufacturing overhead costs incurred during the year totalled $355,000, and the actual direct labor hours worked were 85,000 hours. Calculate the over applied or under applied overhead for the year.

Sterling Manufacturing uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The company estimated its manufacturing overhead at $320,000 for the year and direct labor hours at 80,000 hours. Actual manufacturing overhead costs incurred during the year totalled $355,000, and the actual direct labor hours worked were 85,000 hours. Calculate the over applied or under applied overhead for the year.