Allen Products​ LP, wants to do a scenario analysis for thecoming year. The pessimistic prediction for sales is $ 900,000​;the most likely amount of sales is $ 1,118,000​; and the optimisticprediction is $ 1,288,000. ​Allen's income statement for the mostrecent 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 forDecember​ 31,2019​, and the sales revenue estimates to develop​pessimistic, most​ likely, and optimistic pro forma incomestatements for the coming year.

b. Explain how this method could result in overstatement ofprofits for the pessimistic case and understatement of profits forthe 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 isvariable. $193,516 of the operating expenses is​ fixed; the rest isvariable. 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 forDecember​ 31, 2019, and the sales revenue estimates to develop​pessimistic, most​ likely, and optimistic pro forma incomestatements for the coming year.

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