The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.58 million. Interest expense is expected to remain unchanged at $39,000, and the firm plans to pay $74,000 in cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31,2019, is given(Table is in the picture at the bottom), 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, 2020.

b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2020.

c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of 2020 income? Explain why

Table:

Metroline Manufacturing Income Statement for the Year Ended December 31, 2019 Metroline Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended December 31, 2019 $1,401,000 907,000 $494,000 123,000 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate 40%) Net profits after taxes Less: Cash dividends To retained earnings Cost of goods sold Fixed cost Variable cost $208,000 699,000 $907,000 $371,000 Total cost 39,000 Operating expenses $332,000 132,800 Fixed expenses $38,000 85,000 $123,000 Variable expenses $199,200 Total expenses 64,000 $135,200