Need help with parts C and D FOR PART A Need help with this question Pro forma i

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Need help with parts C and D

FOR PART A

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Pro forma income statement Scenario analysis Allen Products, Ina, wants to do a scervano analysis for the coming year. The pessimistic prediction for sales is $900,000; the most likely amount of sales is $1,125,000; and the optimistic prediction is $1,280,000. Allen's income statement for the most recent year is shown hereEE a. Use the percent-of-sales method, the income statement for December 31, 2015, and the salas 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 profs 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 incorpcrate the following assumptions about the 2015 costs: $250,000 sold is fixed; the rest is variabla. $180,000 of the operating expenses is foxed; the rest is variable. Al the intarest expense is foxed. Plcase ) d. Compare your findings in part c. to your findings in part a. Do your observations conflirm your explanation in part b? s variable. caf the rest is vaniabie. of the cost of goods

Explanation / Answer

c) Performa Income Statement Allen products Inc. for the year ended december 31, 2016 pessimistic Sale $ 9,00,000 Less Cost of goods sold : Fixed 2,50,000 Variable (18.3%) 1,64,700 Gross Profit $485,300 Less Operating expense Fixed 1,80,000 Variable (5.8%) 52,200 Oparating Profit $253,100 Less Interest expense 30,000 Net Profit before taxes $223,100 taxes (25%) 55,775 Net profit after taxes $167,325 cost of goods sold variable percentage ($ 421875 - $ 250000 ) / 937500 Operating expense variable percentage ($ 234375 - $ 180000 ) / $ 937500 d) The profits for the pessimistic case are large in part a then in part c

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