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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:

Question Content Area

1. Prepare an income statement in good form.

Happy Home Helpers, Inc. Income Statement For the Coming Year

Administrative expensesCost of services soldGross marginOperating incomeSalesSelling expenses		$- Select -
Administrative expensesCost of services soldGross marginOperating incomeSalesSelling expenses		- Select -
Administrative expensesCost of services soldGross marginOperating incomeSalesSelling expenses		$- Select -
Less operating expenses:
Cost of services soldGross marginOperating incomeSalesSelling expenses	$- Select -
Administrative expensesCost of services soldGross marginOperating incomeSales	- Select -	- Select -
Operating incomeOperating loss		$- Select -

Question Content Area

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?

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