16 Pro forma income statement: Scenario analysis Allen Productes, Info wants to do a scenario analysis for the coming year. The pessimistic prediction for sales is $900,000, the most likely amount of sales in 51,125,000, and the optimistic predic tion is $1,280,000. Allen's income statement for the most recent yeat follow. Alle Puslacom Statem for Xhey had hembes 6 Sales teve Lese: Cost of goods sold Gross profita I: Operating expenses Operating prolits Les Interest expense Net profits before taxes Leo Tares (rate=25%) Net profits after taxes $937,500 421.875 $S15,625 2.375 $281,250 30,000 $251,250 62.813 5188337 1. Use the percent-of-sales method, the income statement for December 31, 2015, and the sales revenue estimates to develop pessimistic, most likely, and optimistic piro forma income statements for the coming year. b. Explain how the percent-of-sales method could result in an overstatement of profits for the pessimistic case and an understatement of profits for the most likely and optimistic cases C. Restate the pro forma income statements prepared in part a to incorporate the following assumptions about the 2015 costs: $250,000 of the cost of goods sold is fixed, the rest is variable. $180,000 of the operating expenses a fixed the rest is valable. All the interest expense is fixed. Compare your findings in parte to your findings in part a. Do your observaticus confirm your explanation in pare b