Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings: Direct materials ?Direct labor $472,500Variable overhead 15,000Fixed overhead 18,000 Next year, HHH expects to purchase $25,600 of direct materials. Projected beginning and end-ing inventories for direct materials are as follows: Direct Materials InventoryBeginning $4,000Ending 2,600 There is no work-in-process inventory and no finished goods inventory; in other words, a cleaning is started and completed on the same day. HHH expects to sell 15,000 cleanings at a price of $45 each next year. Total selling expense is projected at $22,000, and total administrative expense is projected at $53,000.Required:1. Prepare an income statement in good form.2. What if Jean and Tom increased the price to $50 per cleaning and no other information wasaffected? Explain which line items in the income statement would be affected and how.
Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about
1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings:
Direct materials ?
Direct labor $472,500
Variable overhead 15,000
Fixed overhead 18,000
Next year, HHH expects to purchase $25,600 of direct materials. Projected beginning and end-
ing inventories for direct materials are as follows:
Direct Materials Inventory
Beginning $4,000
Ending 2,600
There is no work-in-process inventory and no finished goods inventory; in other words, a cleaning is started and completed on the same day. HHH expects to sell 15,000 cleanings at a price of $45 each next year. Total selling expense is projected at $22,000, and total administrative expense is projected at $53,000.
Required:
1. Prepare an income statement in good form.
2. What if Jean and Tom increased the price to $50 per cleaning and no other information was
affected? Explain which line items in the income statement would be affected and how.
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