The Teksize Company makes two products, Regular and Large, using the same equipment. Large is simply a bigger version of Regular. One production run of each product is scheduled approximately each week. Teksize uses a costing system that accumulates all overhead in a single cost pool and allocates it based on direct labor hours. Teksize's management has decided to implement ABC, and has just finished a study that revealed significant amounts of costs related to the number of setups. Direct labor hours will still be used as the allocation base for all remaining overhead cost. Information concerning Teksize Company's most recent year of operations is as follows:

Required:
(1) Calculate the total and per-unit costs reported for the two products by the existing costing system, using the format shown in Exhibit 14-3.
(2) Calculate the total and per-unit costs reported for the two products by the ABC system, using the format shown in Exhibit 14-4.
(3) Reconcile the costs reported for Regular by the two costing systems. Use columns for total and per-unit costs.
(4) Does Teksize have a diverse product line, in the sense the term is used in ABC? Why or why not?

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Regular 10,000 Large Total Units produced Direct material cost: 10,000 20,000 Per unit Total $10,000 40,000 50,000 Direct labor: Hours per unit Total hours 10,000 40,000 50,000 $120,000 $480,000 600,000 103 Total cost .. Setups 51 Setup related Other $515,000 985,000 $1,500,000 Total overhead