Caffene Company, which processes coffee beans into ground cofee, is about to ado
ID: 2354996 • Letter: C
Question
Caffene Company, which processes coffee beans into ground cofee, is about to adopt a lean operating envioronment. In anticipation of the change, Hattie Peralto, Caffene's controller, prepared the following list of cost for the month: Coffee beans $5000 insurnace-plant $ 300 Bags 100 presidents'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 300 supervision 400 labels 20 repairs and maintenance 120 materials handling 75 employee benefits 500 1) identify each cost as direct or indirect, assuming that it was incurrred in a traditional manufacturing setting. 2) identify each cost as direct or indirect, assuming that it was incurred ina just in time enrironment 3) Assume that the costs incurred in the JIT environment are for a work cell that completed 5,000 1-pound bags of coffe during the month. Compute the toal direct cost and the direct cost per unit for the bags produced.Explanation / Answer
1)Coffee beans $5000 - direct insurnace-plant $ 300 - indirect Bags 100 - direct presidents's salary 4,000 direct small tools 80 - indirect engineering labor 1,700 - direct depreciation-plant 400 - indirect utilities 1,250 - indirect depreciation-grinder 200 building occupancy 1,940 direct labor 300 - direct supervision 400 - direct labels 20 - direct repairs and maintenance 120 - indirect materials handling 75 - direct employee benefits 500 - indirect 2)Under ideal conditions a company operating at JIT manufacturing system would purchase only enough materials each day to meet that days needs. Moreover, the company would have no goods still in process at the end of the day, and all goods completed during the day would have been shipped immediately to customers. As this sequence suggests, "just-in-time" means that raw materials are received just in time to go into production, manufacturing parts are completed just in time to be assembled into products, and products are completed just in time to be shipped to customers