1-27 Product-Line Profitability Analysis Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, \\( \\mathrm{T}-1 \\) and \\( \\mathrm{T}-2 \\). The sales for \\( \\mathrm{T}-2 \\) are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only \\( \\mathrm{T}-1 \\). Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Chapter 11 Decision Making with a Strategic Emphasis 455 Required 1. Find the expected change in annual operating income by dropping \\( \\mathrm{T}-2 \\) and selling only \\( \\mathrm{T}-1 \\). (Round answer to nearest whole dollar.) 2. By what percentage would sales from \\( \\mathrm{T}-1 \\) have to increase in order to make up the financial loss from dropping T-2? (Round your answer to 2 decimal places. For example, \56.568.) 3. What is the required percentage increase in sales (rounded to 2 decimal places) from \\( T-1 \\) to compensate for lost margin from T-2, if total fixed costs can be reduced by \\( \\$ 45,000 \\) ? 4. What strategic factors should be considered in deciding whether to drop or to keep T-2