Pro forma income statement-Scenario analysis Allen Products, Inc., wants to do a scenario analysis for the coming year. The pessimistic prediction for sales is $910,000; the most likely amount of sales is $1,120,000; and the optimistic prediction is $1,271,000. Allen's income statement for the most recent year is shown here a. 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 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 2015 costs: $264,518 of the cost of goods sold is fixed: the rest is variable. S172,411 of the operating expenses is fixed; the rest is variable. All the interest expense is fixed. (Please see: B.) d. Compare your findings in part c. to your findings in part a. Do your observations confirm your explanation in part b? a. 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 pro forma income statements for the coming year. Complete the pro forma income statement for the year ending December 31, 2016 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.) * Data Table Pro Forma Income Statement Allen Products, Inc. for the Year Ended December 31, 2016 (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Pessimistic Sales S % S S % Less: Cost of goods sold Gross profits Less: Operating expense Operating profits Less: Interest expense Net profits before taxes Taxes (30%) Allen Products, Inc. Income Statement for 2 the Year Ended December 31, 2015 Sales revenue S937.500 Less: cost of good sold 446,250 Gross profits S491,250 Less: operating expenses 233,438 Operating profits S257 812 Less: interest expense 30,938 Net profit before taxes S226,874 Less: taxes (rate 30%) 68,062 Net profits after taxes $ 158,812 S S % S S Net profits after taxes S Print Done Enter any number in the edit fields and then click Check Answer. i Data Table X (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Allen Products, Inc. Income Statement for the Year Ended December 31, 2015 Sales revenue $937,500 Less: cost of good sold Fixed 264,518 Variable 181,732 Gross profits $491,250 Less: operating expenses Fixed 172,411 Variable 61,027 Operating profits $257,812 Less: interest expense 30,938 Net profit before taxes $226,874 Less: taxes (rate 30%) 68,062 Net profits after taxes $158,812 Print Done