Vanhorn Company sells tennis racquets: variable costs for each are $75, and each is sold for $105. Vanhorn incurs $ 270.000 of fixed operating expenses annually. Determine the sales volume in units and dollars required to attain a $ 120.000 profit. Verify your answer by preparing the income statement using the contribution margin format Vanhorn 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 $ 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 Determine the new break-even point (units and $ sales) assuming Vanhorn adopts the quality improvement programme At the end of the year, the actual results are: Units sales are 15,000, with a selling price per unit of $ 104 The variable costs per unit are $ 72 and the fixed operating expenses amount to $ 270,000 Prepare the actual income statement and compare it to the one prepared in question Compute the sales variance and its components, the profit variance and its components.

Using the income statement analysis tools (common sized, variances), how do you evaluate the 2003 results versus 2002. Management has also indicated that price, on average, has deteriorated by 5% during 2003. As a banker looking for granting a loan to the Company, how do you evaluate the situation of the company in 2003? Use financial ratios to justify your comments and decision How would you comment the asset management performance in 2003 versus 2002? Justify your comments with all related ratios Calculate the ROI and ROE for the 2 years Prepare the Cash Flow statement (indirect method) with the following additional information: the Company purchased equipment for $ 20.000, 50% of which were paid in exchange of shares issued Dividends declared and paid in 2003 amounted to $ 5.000 What can you conclude from the Cash generated used by activity?  

INCOME STATEMENT Sales Cost of Goods Sold Gross Margin Selling expenses Administrative expenses Depreciation Operating Income (EBIT Interest expense Tax Income before Tax Net Income BALANCE SHEET Cash & Banks Account Receivable Inventory Current assets Building & Equipment Allowance for Depreciation Fixed Assets Total Assets Accounts Payables Accruals Current Liabilities Long term Debt 2002 500'000 350'000 150'000 60'000 30'000 15'000 45'000 13'000 32'000 11'200 20'800 2002 5'000 100'000 80'000 185'000 200'000 (120'000) 80'000 265'000 70'000 18'000 88'000 80'000 2003 550'000 410'000 140'000 61'000 32'000 1:5'000 32'000 11'000 21'000 7'350 13'650 2003 13'000 106'000 89'000 208'000 220'000 (135'000) 85'000 293000 8-4'000 15'350 99'350 78'000