The marketing department of Metroline Manufacturing estimates that its sales in

20202020

will be

$ 1.51$1.51

million. Interest expense is expected to remain unchanged at

$ 36 comma 000$36,000,

and the firm plans to pay

$ 66 comma 000$66,000

in cash dividends during

20202020.

Metroline Manufacturing's income statement for the year ended December 31,

20192019,

is given

Metroline Manufacturing

Income Statement

for the Year Ended December 31, 20192019

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Sales revenue

$ 1 comma 405 comma 000$1,405,000

Less: Cost of goods sold

919 comma 000919,000

Gross profits

$ 486 comma 000$486,000

Less: Operating expenses

126 comma 000126,000

Operating profits

$ 360 comma 000$360,000

Less: Interest expense

36 comma 00036,000

Net profits before taxes

$ 324 comma 000$324,000

Less: Taxes

(rate equals 40 %rate=40%)

129 comma 600129,600

Net profits after taxes

$ 194 comma 400$194,400

Less: Cash dividends

62 comma 00062,000

To retained earnings

Modifying $ 132 comma 400 with double underline $132,400

Metroline Manufacturing

Breakdown of Costs and Expenses

into Fixed and Variable Components

for the Year Ended December 31, 20192019

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Cost of goods sold

Fixed cost

$ 214 comma 000$214,000

Variable cost

705 comma 000705,000

Total cost

Modifying $ 919 comma 000 with double underline $919,000

Operating expenses

Fixed expenses

$ 37 comma 000$37,000

Variable expenses

89 comma 00089,000

Total expenses

Modifying $ 126 comma 000 with double underline $126,000

,

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 the year ended December 31,

20202020.

b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31,

20202020.

c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of

20202020

income? Explain why.

a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31,

20202020.

Complete the pro forma income statement for the year ended December 31,

20202020

below:(Round the percentage of sales to four decimal places and the pro forma income statement amounts to the nearest dollar.)

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Pro Forma Income Statement
Metroline Manufacturing, Inc.
for the Year Ended December 31, 2020
(percent-of-sales method)
Sales	$
Less: Cost of goods sold					%
Gross profits	$
Less: Operating expenses					%
Operating profits	$
Less: Interest expense
Net profits before taxes	$
Less: Taxes
Net profits after taxes	$
Less: Cash dividends
To retained earnings	$