1. Income Statement

   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 ending 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.

   Happy Home Helpers, Inc.
   Income Statement
   For the Coming Year
   Administrative expenses Cost of services sold Gross margin Sales Selling expenses Operating income		$
   Administrative expenses Cost of services sold Gross margin Sales Selling expenses Operating income
   Administrative expenses Cost of services sold Gross margin Sales Selling expenses Operating income		$
   Less operating expenses:
   Cost of services sold Gross margin Sales Selling expenses Operating income	$
   Administrative expenses Cost of services sold Gross margin Sales Operating income
   Operating income Operating loss		$

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   2. What if Jean and Tom increased the price to $50 per cleaning and no other information was affected? Which of the following statements would be true?

   • Sales would rise by $50,000
   • Operating income would be $142,500
   • Fixed costs per cleaning would decrease