Reference no: EM13890275

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.)