P 4. Funz Company, which produces wooden toys, is about to adopt a lean operating environment. In anticipation of the change, Letty Hernandez, Funz’s controller, prepared the following list of costs for December:

Wood $1,200 Insurance–plant $ 324 Bolts 32 President’s salary 4,000 Small tools 54 Engineering labor 2,700 Depreciation–plant 450 Utilities 1,250 Depreciation–machinery 275 Building occupancy 1,740 Direct labor 2,675 Supervision 2,686 Indirect labor 890 Operating supplies 254 Purchased parts 58 Repairs and maintenance 198 Materials handling 74 Employee benefits 2,654 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 lean environment.

3. Assume that the costs incurred in the lean environment are for a work cell that completed 1,250 toy cars in December. Compute the total direct cost and the direct cost per unit for the cars produced.