The following CVP income statements are available for Al-Quds Corp. which has two plants A and B.

			Plant A	Plant B
Sales Revenue			2,000,000	2,000,000
Variable Cost			1,400,000	700,000
Contribution Margin			600,000	1,300,000
Fixed Cost			120,000	660,000
Net Income			480,000	640,000

Instructions

1. Compute the degree of operating leverage for the two plants (you can use the following table).

2. Determine which plant's cost structure contains more risk to change in sales volume and Why?

3. Determine the effect on each plant's net income if sales revenue decreased by 15%.