Question: Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2016 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 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.

1. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2016.
2. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2.016.
3. Compare and contrast the statements developed in parts a and b. Which statement probably provides the better estimate of 2016 income? Explain why.

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