Jean and tom perritz own and manage happy home 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 rojected 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.

For the answer to the question above,

Revenues from sales; 
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$675,000 
Cost of goods sold: 
Materials inventory (beginning) . . . . . . . . .$. 4,000 
Materials purchases . . . . . . . . . . . . . . . . . . . . .25,600 
Materials available for use . . . . . . . . . . . . .  . .29,600 
Less: 
Materials inventory (ending) . . . . . . . . . . . . .2,600 
Cost of materials used . . . . . . . . . . . . . . . . . . . . . . . . . .$. 27,000 
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .472,000 
Variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 
Fixed overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 
Total cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .532,000 
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143,000 
Operating expenses: 
Selling expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22,000 
Administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .53,000 
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75,000 
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$. 68,000

Renting provides greater flexibility but can lead to higher costs in the long term.answer: b) or the second option.

Ithink the answer is b