Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales next year will be $$1\mathrm{.}67$ million. Interest expense is expected to remain unchanged at $$39,000$ and the firm plans to pay $$71,000$ in cash dividends. Metroline Manufacturing's income statement for the previous year is given $,$ along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components.

a$.$ Use the percent$-$of$-$sales method to prepare a pro forma income statement for next year.

b$.$ Use fixed and variable cost data to develop a pro forma income statement for next year.

c$.$ Compare and contrast the statements developed in parts $a.$ and b$.$ Which statement probably provides the better estimate of income? Explain why.

Data table

a$.$ Use the percent$-$of$-$sales method to prepare a pro ff

Complete the pro forma income statement for the yea nearest dollar.$)$

Pro Forma Income Statem

Metroline Manufacturing,

for the Year Ended December $($percent$-$of$-$sales methoo

Sales

$

Less: Cost of goods sold

Gross profits

Less: Operating expenses

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$($For Income Staement, click on the icon here $$ in order to copy the contents of the data table below into a spreadsheet.$)$

$($For Breakdown of Costs and Expenses, click on the icon here $D$ in order to copy the contents of the data table below into a spreadsheet.$)$

$\backslash$table$[[\backslash$table$[[$Metroline Manufacturing$],[$Income Statement$],[$for the Year Just Ended$]],\backslash$table$[[$Metroline Manufacturing$],[$Breakdown of Costs and Expenses$],[$into Fixed and Variable Components$],[$for the Year Just Ended$]]],[$Less: Cost of goods sold,$918,000,$Cost of goods sold,$],[$Gross profits,$$490,000,$Fixed cost,$$202,000$