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:

Required:
1. Prepare a statement of services produced in good form.
2. What if HHH planned to purchase $30,000 of direct materials? Assume there would be no change in beginning and ending inventories of materials. Explain which line items on the statement of services produced would be affected and how (increase or decrease).LO1

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Direct materials Direct labor Variable overhead Fixed overhead $ 27,000 472,500 15,000 18,000 Next year, HHH expects to purchase $25,600 of direct materials. Projected beginning and ending inventories for direct materials are as follows: Beginning Ending Direct Materials Inventory $4,000 2,600 There is no work-in-process inventory; in other words, a cleaning is started and com- pleted on the same day.