Using an operating leverage analysis determine how much

Question

Alabama Corporation and California Corporation have the same sales and profits as follows:

Alabama                       California

Sales                                  $1,000,000                     $1,000,000

Variable Costs                        600,000                         400,000

Contribution Margin                   400,000                         600,000

Fixed Costs                              200,000                         400,000

Profit                                        200,000                         200,000

Using an operating leverage analysis, determine how much profits would increase for each company if each experienced a 10% increase in sales.