Silkworm Inc is a manufacturer of construction equipment, machinery and engines. It also sells financial services. You anticipate a substantial increase in its machinery sales. You have the following data.

US $'000	2018	2019
Net sales	39,867	57,392
COGS	30,367	43,578
SG&A	4,248	5,203

and thus in percentage terms:

% of sales	2018	2019
Net sales	100	100
COGS	76.2	75.9
SG&A	10.7	9.1

a) Estimate the fixed and variable components of COGS and SG&A in 2019. What would be your estimate of operating profits for 2020 if predicted net sales for 2020 were US$ 100,000,000? Briefly comment on whether your analysis makes sense. What are the advantages and disadvantages of this approach?