caffene company which processes coffee beans into ground coffee is about to adopt a 544640

Direct and Indirect Costs in Lean and Traditional Manufacturing Environments

Caffene Company, which processes coffee beans into ground coffee, is about to adopt a lean 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 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.