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

Plant A Plant B Sales Revenue 800,000 800,000 Variable Cost 350,000 210,000 Contribution Margin 450,000 590,000 Fixed Cost 220,000 450,000 Net Income 230,000 140,000

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 increased by 10%