Compute the total direct cost for the bags produced

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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.)

Reference no: EM13890275

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