Fuzzy Button is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT).
2.	The companys operating costs (excluding depreciation and amortization) remain at 80.00% of net sales, and its depreciation and amortization expenses remain constant from year to year.
3.	The companys tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT).
4.	In Year 2, Fuzzy Button expects to pay $200,000 and $321,300 of preferred and common stock dividends, respectively.

Complete the Year 2 income statement data for Fuzzy Button, then answer the questions that follow. Round each dollar value to the nearest whole dollar.

Fuzzy Button Clothing Company
Income Statement
Years Ending December 31
	Year 2 (Forecasted)	Year 1
Net sales		$10,000,000
Fixed operating costs, except depreciation and amortization	( )	(8,000,000)
Depreciation and amortization expenses	(400,000)	(400,000)
Net operating income (or EBIT)		$1,600,000
Interest	( )	(160,000)
Earnings before taxes (or EBT)		$1,440,000
Taxes (40%)	( )	(576,000)
Net Income		$864,000
Preferred dividends	( )	(200,000)
Earnings available to common stockholders (EAC)		$664,000
Common dividends	( )	(259,200)
Addition to retained earnings	$549,700	$404,800