Jackson Painting Co. paints the interiors of houses. During the year, they expect to paint 10,000 square meters

(m2) of space over 20 jobs at a cost of $548,000. Jackson does not have separate categories for Direct Labour

and Direct Materials, and instead captures all costs in a single overhead pool. An examination of overhead

costs revealed the following:

Labour: total costs $300,000

80% of the labour is spent painting, 15% is spent preparing each site, and 5% is spent on billing and

customer relations.

Materials: total costs $248,000

A breakdown of materials costs is as follows:

Paint and brushes: $210,000

Plaster, tape, cleaners, and other site preparation materials: $20,000

Other materials: $18,000 (split evening between painting and site preparation)

The industry standard is to quote jobs at "Cost + 10%"; meaning 10% profit is added to costs to calculate the

total price to be quoted to customers.

Required:

A. How much does Jackson expect it to charge for a 2,000 m2 job assuming that all costs are allocated on

the basis of m2.

B. How much does Jackson expect it to quote for a 2,000 m2 job assuming that all costs are allocated on

an Activity Based Costing system based on separate costs pools for "Painting" and "Job Support".

Painting costs are driven by m2. Job Support costs are driven by the number of jobs. Each job requires

site-preparation. Site preparation costs tend to be equal for each job regardless of the amount of

painting required. Each job also requires labour costs for billing and customer relations, and related

materials.

C. Jackson wants to continue using a single cost pool to allocate costs (and rejects Activity Based Costing).

Jackson's competitors have similar costs and have adopted Activity Base Costing. Next year, what is

likely to happen when Jackson bids on a Big Job (over 2,000 m2) and a Small jobs (under 200 m2)?