application.cfm not loading

My application.cfm file is not loading on our ColdFusion 8 install on Linux. I put up some test code to verify as follows:

application.cfm -

<cfset var1 = 10>

index.cfm

<cfoutput>#var1#</cfouput>

When I try to run the index.cfm file I get the error message, " Variable VAR1 is undefined." Otherwise ColdFusion is working normally. I have database queries on my site that are running properly. I can't understand why the application.cfm file is not loading. Any ideas???