1 PROBLEM Vanhorn Company sells tennis racquets; variable costs for each are $75, and each is sold for S105. Vanhorn incurs S 270,000 of fixed operating expenses annually. 1. Determine the sales volume in units and dollars required to attain a S 120,000 profit. Verify your answer by preparing the income statement using the contribution margin format 2. Vanhom is considering establishing a quality improvement process that will require a 10 increase in the variable cost per unit. To inform its customers of the quality improvements, the company plan to spend an additional S 60,000 for advertising. Assuming that the improvement programme will increase sales to a level that is 5,000 above the amount computed in question 1, should Vanhorn proceeds with plans to improve product quality? Support your answer by preparing a budgeted income statement 3. Determine the new break-even point (units and S sales) assuming Vanhorn adopts the quality improvement programme 4. At the end of the year, the actual results are: a. Units sales are 15,000, with a selling price per unit of S 104 b. The variable costs per unit are 72 and the fixed operating expenses amount to S 270,000 Prepare the actual income statement and compare it to the one prepared in question 1. Compute the sales variance and its components, the profit variance and its components