The marketing department of Metroline Manufacturing
estimates that its sales in 2016 will be $1.62 million. Interest expense is expected
to remain unchanged at $30,000, and the firm plans to pay $70,000 in cash dividends
during 2016. Metroline Manufacturing?s income statement for the year ended
December 31, 2015, and a breakdown of the firm?s 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