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 about1.5 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                      $472,500Variable overhead             15,000Fixed overhead                 18,000 Next year, HHH expects to purchase $25,600 of direct materials. Projected beginning and end-ing inventories for direct materials are as follows:                            Direct Materials InventoryBeginning                    $4,000Ending                          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.2. What if Jean and Tom increased the price to $50 per cleaning and no other information wasaffected? Explain which line items in the income statement would be affected and how.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

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 end-
ing 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.
2. What if Jean and Tom increased the price to $50 per cleaning and no other information was
affected? Explain which line items in the income statement would be affected and how.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Asset replacement decision
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education