Required

a$.$ Mr$.$ Krog is not convinced by Peter's analysis and has turned to you, an outside consultant, to provide a preliminary estimate of lost profit. Using the limited information contained in the financial statements for $2012$ and $2013,$ estimate lost profits. $($Hint: You can proceed as follows.$)$

STEP $1.$ Determine the level of fixed and variable costs in $2012$ as a function of sales. You can use account analysis, the high$-$low method, or regression if you are familiar with that technique.

STEP $2.$ Predict what sales would have been in $2013$ if there was no fire. Using this level of sales and the fixed and variable cost information from Step $1,$ estimate what profit would have been in $2013.$

STEP $3.$ The difference between actual profit in $2013$ and the amount estimated in Step $2$ is lost profit.

b$.$ Based on your preliminary analysis, do you recommend that Mr$.$ Krog aggressively pursue a substantial claim for lost profit?

c$.$ What is the fundamental flaw in Peter Newell's analysis?