Say Cheese Company manufactures picture frames that sell for \(\$ 25\) per frame. Say Cheese does not maintain an inventory; all items produced are sold during the period. Thus, all production costs appear on the income statement. The company has fixed manufacturing overhead of \(\$ 30,000\) per year. The company's fixed selling and administrative expense is \(\$ 40,000\) per year. Other expenses are as follows:

Say Cheese would like to estimate its net income if sales for 2004 are expected to be 8,000 units.
\section*{Required}
A. Create a pro forma income statement using Exhibit 3 as a guide.
B. Discuss the uses for a pro forma income statement.

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Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative expense Cost per Unit $5.00 2.00 3.00 2.00