The marketing department of Metroline Manufacturing Estimates that its sales in 2016 will be $1.57 million. Interest expense is expected To remain unchanged at $35,000, and the firm plans to pay $73,000 in cash dividends during 2016. Metroline Manufacturings income statement for the year ended December 31, 2015, and a breakdown of the firms cost of goods sold and operating expenses into their fixed and variable components are given below. a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2016. b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2016. c. Compare and contrast the statements developed in parts a and b. Which statement probably provides the better estimate of 2016 income? Explain why Metroline Manufacturing Income Statement for the Year Ended December 31, 2015

. Sales revenue $1,396,000

Less:Cost of goods sold 916,000

Gross profits $ 480,000

Less: Operating expenses 126,000

Operating profits $ 354,000

Less: Interest expense 35,000

Net profits before taxes $ 319,000

Less: Taxes (rate = 40%) 127,000

Net profits after taxes $ 191,400

Less: Cash dividends 62,000

To retained earnings $ 129,400 Metroline Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended December 31, 2015

Cost of goods sold Fixed cost $208,000

Variable cost 708,000

Total costs $916,000

Operating expenses Fixed expenses $ 31,000

Variable expenses 95,000

Total expenses $126,000