Jean and Tom Perritz own and manage Happy Home Helpers Inc. (HHH), a housecleaning service. Each cleaning (cleaning one house one time) takes a team of threehouse cleaners about 1.5 hours. On average, HHH completes about 15,000 cleaningsper year. The following total costs are associated with the total cleanings:
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Direct Materials
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$ 27,000
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Direct Labor
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472,500
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Variable Overhead
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15,000
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Fixed overhead
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18,000
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Next year, HHH expects to purchase $25,600 of direct materials. Projected beginningand ending inventories for direct materials are as follows:
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Direct Materials Inventory
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Beginning
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$4,000
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Ending
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2,600
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There is no work-in-process inventory; in other words, a cleaning is started and completed on the same day.
Required:
1. Prepare a statement of services produced in good form.
2. What if HHH planned to purchase $30,000 of direct materials? Assume there would be no change in beginning and ending inventories of materials. Explain which line items on the statement of ervices produced would be affected and how (increase or decrease).