Peralto Company, which processes coffee beans into ground coffee, is about to adopt a JIT operating environment. In anticipation of the change, Peralto's controller prepared the following list of costs for the month:
|
Coffee beans
|
$5,000
|
Insurance-plant
|
$ 300
|
|
Bags
|
100
|
President'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
|
1,000
|
Supervision
|
400
|
|
Indirect labor
|
300
|
Operating supplies
|
205
|
|
Labels
|
20
|
Repairs and maintenance
|
120
|
|
Materials handling
|
75
|
Employee benefits
|
500
|
Required:
1. Identify each cost as direct or indirect, assuming that it was incurred in a traditional manufacturing setting.
2. Identify each cost as direct or indirect, assuming that it was incurred in a just-in-time (JIT) environment.
3. Assume that the costs incurred in the JIT environment are for a work cell that completed 5,000 1-pound bags of coffee during the month. Compute the total direct cost and the direct cost per unit for the bags produced. (Carry unit cost to two decimal places.)