Using the below information: Sales revenue $937,600 Less: cost of good sold Fixed 257,205 Variable 171,278 Gross profits $509,117 Less: operating expenses Fixed 202,533 Variable 54,369 Operating profits $252,215 Less: interest expense 29,066 Net profit before taxes $223,149 Less: taxes (rate 25%) 55,787 Net profits after taxes $167,362 Allen Products LP, wants to do a scenario analysis for the coming year. The pessimistic prediction for sales is $894,000; the most likely amount of sales is $1,124,000; and the optimistic prediction is $1,270,000. Allen's income statement for the most recent year is shown above, a. 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. 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 foma income statement in prepared to part a. to incorporate assumptions about 2019 costs $257,205 of the cost of goods sold is fixed, the rest is variable. 202,533 of the operating expense is fixed rest is variable. All interest is fixed

Pro Forma Income Statement Allen Products, Inc. for the Year Ended December 31, 2020 Sales: Less: Cost of goods sold:_____ Gross profits: ___ / _____% Less: Operating expense:______/____% Operating profits:_______ Less: Interest expense:_____/______% Net profits before taxes:_______ Taxes (25%):_______ Net profits after taxes:________