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Part $1$

Pro forma income statement$$The marketing department of Metroline Manufacturing estimates that its sales next year will be

$ $1\mathrm{.}51$$$1\mathrm{.}51$

million. Interest expense is expected to remain unchanged at

$ $38$ comma $000$$$38,000,$

and the firm plans to pay

$ $73$ comma $000$$$73,000$

in cash dividends. Metroline$$ Manufacturing's income statement for the previous year is given

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$,$

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 next year.

b$.$ Use fixed and variable cost data to develop a pro forma income statement for next year.

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