Caffene Company, which processes coffee beans into ground coffee, is about to adopt a JIT operating environment. In anticipation of the change, Hattie Peralto, Caffene's controller, prepared the following list of costs for the month:

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 complete 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.

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S 300 4,000 1,700 1,250 200 Building occupancy1,940 $5,000 Coffee beans Bags Small tools Depreciation-plant 100 President's salary 80 Engineering 400 Utiliries Direct labor Indirect labor 1,000 Supervision 205 20 Repairs and maintenance 120 300 Operating supplies Materials handling 75 Employce benefits