Caffene Company, which processes coffee beans into ground cofee, is about to adopt a lean operating envioronment. In anticipation of the change, Hattie Peralto, Caffene's controller, prepared the following list of cost for the month: Coffee beans $5000 insurnace-plant $ 300 Bags 100 presidents's salary 4,000 small tools 80 engineering labor 1,700 depreciation-plant 400 utilities 1,250 depreciation-grinder 200 building occupancy 1,940 direct labor 300 supervision 400 labels 20 repairs and maintenance 120 materials handling 75 employee benefits 500
1) identify each cost as direct or indirect, assuming that it was incurrred in a traditional manufacturing setting.
2) identify each cost as direct or indirect, assuming that it was incurred ina just in time enrironment
3) Assume that the costs incurred in the JIT environment are for a work cell that completed 5,000 1-pound bags of coffe during the month. Compute the toal direct cost and the direct cost per unit for the bags produced.