4. A Manufacturing company is preparing pro forma financial statements for 2019. The firm utilized the percent-of-sales method to estimate costs for the next year. Sales in 2018 were $2 million and are expected to increase to $2.4 million in 2019. The firm has a 40 percent tax rate. Income Statement A Manufacturing For the Year Ended December 31, 2018 Sales $2,000,000 Less: Cost of goods sold 1,200,000 Gross profit $ 800,000 Less: Selling expense 200,000 General & administrative expense 60,000 Less: Depreciation 40,000 Operating profit $ 500,000 Less: Interest 80,000 Earnings before taxes $ 420,000 Less: Taxes (21%) 88,200 Net profit after taxes/EACS $ 331,800 Common stock dividends $ 100,000 (a) Given the 2018 income statement above, estimate net profit and retained earnings for 2019. (b) If $200,000 of the cost of goods sold and $40,000 of selling expense are fixed costs; and the interest expense and dividends are not expected to change, what is the dollar effect on net income and retained earnings? What is the significance of this effect