Final answer:
The correct sequence for developing a pro forma income statement is establishing a sales projection; determining a production schedule; computing other expenses; and then determining profit by completing the statement. So, the correct option is D: 3,2,1,4.
Step-by-step explanation:
Creating a pro forma income statement is a critical task for businesses, as it helps to project future financial performance. The correct order of steps to develop a pro forma income statement are as follows:
- Establish a sales projection: This forms the basis of the income statement as it dictates the revenue that will be generated.
- Determine a production schedule: Once sales projections are set, this schedule aligns the production with expected sales volume.
- Compute other expenses: With the production plan in place, all other expenses that are likely to be incurred are calculated.
- Finally, determine profit by completing the actual pro forma statement: By comparing total revenue with total costs, which includes production and other expenses, the profit or loss can be ascertained.