Allen Products LP, wants to do a scenario analysis for the coming year. The pessimistic prediction for sales is $ 900,000; the most likely amount of sales is $ 1,118,000; 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 $937,400 Less: cost of good sold 436,828 Gross profits $500,572 Less: operating expenses 245,599 Operating profits $254,973 Less: interest expense 30,934 Net profit before taxes $224,039 Less: taxes (rate 25%) 56,010 Net profits after taxes $168,029

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:

$252,497 of the cost of goods sold is fixed; the rest is variable. $193,516 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 develop pessimistic, 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.)