The marketing department of Metroline Manufacturing estimates that its sales in 2010 will be $1.5 million. Interest expense is expected to remain unchanged at $35,000 and the firm plans to pay $70,000 in cash dividends during 2010 to preferred stock shareholders. Common shareholders have a total of 1000 shares. Its income statement and costs of goods sold and operating expenses from last year are given below.

Income Statement Metroline Manufacturing, Inc. for the Year Ended December 31, 2009
Sales	$1,400,000
Less: Cost of goods sold (0.65 sales)	910,000
Gross profits	$ 490,000
Less: Operating expenses (0.086 sales)	120,000
Operating profits	$ 370,000
Less: Interest expense	35,000
Net profits before taxes	$ 335,000
Less: Taxes (0.40 NPBT)	134,000
Net profits after taxes	$ 201,000
Less: Cash dividends	66,000
To retained earnings	$ 135,000

Costs of Good Sold and Operating Expenses in 2009:

Costs of Goods Sold:

Fixed costs = $210,000

Variable costs = $700,000 (which is 50% of sales)

Operating Expenses:

Fixed expenses = $36,000

Variable expenses = $84,000 (which is 6% of sales)

a) Use the percent-of-sales method to compute the operating profits in a pro forma income statement for the year ended December 31, 2010.

b) Assume that fixed costs and fixed expenses stay the same in 2010 and that the variable costs are 50% of sales and variable expenses are 6% of sales. Use the fixed and variable cost and expense data to compute the operating profits in a pro forma income statement for the year ended December 31, 2010.