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:

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 decimalplaces.)

Coffee beans Bags Small tools Depreciation-plant Depreciation-grinder Direct labor Indirect labor Labels Materials handling $5,000 Insurance plant 100 80 400 200 1,000 President's salary Engineering labor Utilities Building occupancy Supervision 300 4,000 1,700 1,250 1,940 400 205 120 500 300 Operating supplies Repairs and maintenance Employee benefits 20 75