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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
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%
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