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: 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: 1. Prepare an income statement in good form. Happy Home Helpers, Inc. Income Statement For the Coming Year Less Operating expenses:

Answer 1

Particulars	Amount (in $ )	Amount (in $ )
Beginning Direct Material Inventory	$ 4,000
Add: Direct Material Purchases	$ 25,600
Raw Material Available for use	$ 29,600
Less: Ending Direct Material Inventory	($ 2,600)
Direct materials used in Production		$ 27,000
Direct Labor		$ 472,500
Manufacturing Overhead ( $ 15,000 + $ 18,000 )		$ 33,000
Total Manufacturing Costs		$ 532,500
Add: Beginning Work In Process Inventory		$ 0
Less: Ending Work In Process Inventory		($ 0)
Cost of goods manufactured		$ 532,500
Add: Beginning Finished goods Inventory		$ 0
Less: Ending Finished goods Inventory		($ 0)
Cost of Goods Sold		$ 532,500
1)
Happy Home Helpers, Inc. Income Statement For the Coming Year
Sales Revenue (15,000 x $ 45 )		$ 675,000
Cost of goods sold		($ 532,500)
Gross Profit		$ 142,500
Less: Operating Expenses:
Selling Expenses	$ 22,000
Administrative Expenses	$ 53,000
Total Operating Expenses		($ 75,000)
Net Operating Income		$ 67,500
2)
Happy Home Helpers, Inc. Income Statement For the Coming Year
Sales Revenue (15,000 x $ 50 )		$ 750,000
Cost of goods sold		($ 532,500)
Gross Profit		$ 217,500
Less: Operating Expenses:
Selling Expenses	$ 22,000
Administrative Expenses	$ 53,000
Total Operating Expenses		($ 75,000)
Net Operating Income		$ 142,500
Change in Net Income           = $ 142,500 (-) $ 67,500	$ 75,000 (Increase )