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
		$
		$
Less operating expenses:
	$
Operating income		$

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?

a. Sales would rise by $50,000

b. Operating income would be $142,500

c. Fixed costs per cleaning would decrease