Question

Cornerstone Exercise 2.8 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 Variable overhead Fixed overhead 472,500 15,000 18,000 continued)

Answer 1

Solution 1:

Projected Income Statement - HHH Inc.
Particulars		Amount
Sales Revenue (15000*$45)		$675,000.00
Cost of sales:
Direct material consumed ($4,000 + $25,600 - $2,600)	$27,000.00
Direct labor	$472,500.00
Variable overhead	$15,000.00
Fixed overhead	$18,000.00
Total cost of sales		$532,500.00
Gross Profit		$142,500.00
Selling and administrative expenses:
Selling expenses	$22,000.00
Administrative expenses	$53,000.00
Total selling and administrative expenses		$75,000.00
Net Income		$67,500.00

Solution 2:

If Jean and Tom increase the price to $50 per cleaning then "Sales revenue" in the income statement will be affected and same will be increased by $75,000. (15000*$5)

Answer 2

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	$470,000
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: