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; 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 services produced would be affected and how (increase or decrease).