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 Step 1

Given that:

Contribution margin in the department = $50,000

Fixed Expenses of Department = $65000

Avoidable Fixed Costs = $40000

Increase in Contribution margin of other product lines by discontinuing this department = $120,000

Step 2

Existing contribution margin will be lost in case department will be discontinued. This will reduce net income of the company.

Fixed costs $40,000 that can be eliminated will increase net income $40000 of the company.

Contribution margin of other product lines $120,000 will increase net income.

Net change in company's overall earnings = Increase of net income from contribution margin of other product lines + Increase in net income by avoiding net income - Decrease in net income due to lost contribution

= 120,000 + 40,000 - 50,000

= $110,000

So, If the department is discontinued, then annual change in the company's overall net operating will be increase in earnings by $110,000.

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QUESTION 6 (a) The bar shown in Figure Q2(a) is subjected to tensile load of 150 Kn. If the stress in the middle portions is limited to 160 N/mm², determine the diameter of the middle portion. Find also the length of the middle portion if the total elongation of the bar is to be 0.25 mm. E E = 2.0 + 105N/mm². (12 marks) 150 KN 10 cm DIA 10 cm DIA 150 KN 45 cm Figure Q6(a) (b) A brass bar, having cross-section area of 900 mm², is subjected to axial forces as shown in Figure Q2(b), in which AB = 0.6 m, BC = 0.8 m, and CD = 1.0 m. Find the total elongation of the bar. E = 1.0 + 105N/mm2 . (8 marks) Page 4 of 5 B D 40 KN 70 KN 20 KN 10 KN Figure Q6(b) (TOTAL = 20 MARKS)

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