Question
Plum Tree Processing cleans and sorts fish brought into port by local boats. Plum Tree tracks the labor hours it takes to serve each boat,
Plum Tree Processing cleans and sorts fish brought into port by local boats. Plum Tree tracks the labor hours it takes to serve each boat, and has traditionally reported the total cost as the cost of direct labor plus an additional$20 per labor hour for overhead, calculated on the basis of $200,000 of overhead spread over 10,000 labor hours each year.
Following advice they just received from a recent graduate, they have recently switched to a two-stage system. The student pointed out that the sushi-grade fish was being processed by hand, while commercial-grade fish was processed with the help of expensive machinery. As a result, the sushi-grade fish was being charged too much overhead.
Under the new system, $40,000 of overhead is assigned to the sushi-processing pool, with the remaining $160,000 assigned to the commercial-processing pool. Overhead in each pool is allocated over 5,000 labor hours.
The Daisy (a ship with an unusual bow shape) was just processed, and X% of its labor hours were dedicated to sushi processing. Daisy's overhead allocation would have been exactly the same under the old and new accounting systems.
What is the value of X?
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