Income Statement Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (H
ID: 2531868 • Letter: I
Question
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:
Next year, HHH expects to purchase $25,600 of direct materials. Projected beginning and ending inventories for direct materials are as follows:
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? 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
Direct materials ? Direct labor $472,500 Variable overhead 15,000 Fixed overhead 18,000Explanation / Answer
If price is increased by $ 50, net opertaing income will rise by $ 75,000 and will become $ 1,42,500.
Revenue 6,75,000 COGS- Material Cost 27,000 Direct Labour 4,72,500 Variable overhead 15,000 Selling Exp 22,000 Admin Exp 53,000 Fixed Overhead 18,000 Total Cost 6,07,500 Profit 67,500