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 $475,000 Variable overhead 15,000 Fixed overhead 18,000 Next year, HHH expects to purchase $26,600 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 $23,000, and total administrative expense is projected at $53,000.

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? Which of the following statements would be true?