Allen Products LP, wants to do a scenario analysis for the coming year. The pessimistic prediction for sales is $ 901,000; the most likely amount of sales is $ 1,126,000; and the optimistic prediction is $ 1,288,000. Allen's income statement for the most recent year is shown here

Allen Products, Inc. Income Statement for the Year Ended December 31, 2019

Sales revenue $937,200

Less: cost of goods sold 389,875

Gross profits $547,325

Less: operating expenses 251,170

Operating profits $296,155

Less: interest expense 32,802

Net profit before taxes $263,353

Less: taxes (rate 30%) 79,006

Net profits after taxes $184,347

a. Use the percent-of-sales method, the income statement for December 31,2019, and the sales revenue estimates to develop pessimistic, most likely, and optimistic pro forma income statements for the coming year.

b. Explain how this method could result in overstatement of profits for the pessimistic case and 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 costs:

$208,681 of the cost of goods sold is fixed; the rest is variable. $198,070 of the operating expenses is fixed; the rest is variable. All the interest expense is fixed.

d. Compare your findings in part c. to your findings in part a. Do your observations confirm your explanation in part b?

Use the percent-of-sales method, the income statement for December 31, 2019, and the sales revenue estimates to developpessimistic, most likely, and optimistic pro forma income statements for the coming year.

Complete the pro forma income statement for the year ending December 31, 2020 that is shown below (pessimistic scenario): (Round the percentage of sales to one decimal place and the pro forma income statement accounts to the nearest dollar.)