Direct and Indirect Costs in JIT and Traditional Manufacturing Environments E11a

Question

Direct and Indirect Costs in JIT and Traditional Manufacturing Environments E11a.

The cost categories in the following list are typical of many manufacturing operations:

a. Direct materials: (1) Sheet steel (2) Iron castings

b. Assembly parts: (1) Part 24 (2) Part 15

c. Direct labor

d. Engineering labor

e. Indirect labor

f. Operating supplies

g. Small tools

h. Depreciation—plant

i. Depreciation—machinery

j. Supervisory salaries

k. Electrical power

l. Insurance and taxes—plant

m. President’s salary

n. Employee benefits

Identify each cost as direct or indirect, assuming that it was incurred in (1) a traditional manufacturing setting and (2) a JIT environment.

Explanation / Answer

Traditional Method

JIT

Particulars Type Direct Materials Direct Assembly parts Indirect Direct Labor Direct Engineering Labor Indirect Indirect Labor Indirect Operating Supplies Indirect Small Tools Indirect Deprerciation Plant Indirect Depreciation Machinery Indirect Supervisory Salaries Indirect Electrical Power Indirect Insurance and Taxes- Plant Indirect President Salary Indirect Employee Benefits Indirect

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