$4$

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, T$-1$ and T$-2.$ The sales for T$-2$ are decreasing and the purchase costs are increasing. The firm might drop T$-2$ and sell only 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.

Skipped

$\backslash$table$[[$Sales$,$T$-1,$T$-2],[$Variable costs:,$$300,000,$$$340,000],[$Cost of goods sold,$90,000,170,000],[$Selling & administrative,$15,000,70,000],[$Contribution margin,$$195,000,$$$100,000],[$Fixed expenses:,,$],[$Fixed corporate costs,$80,000,95,000],[$Fixed selling and administrative,$$32,000,41,000],[$Total fixed expenses,$$83,000,$$$(36,000)],[$Operating income,,$]]$

Required:

Find the expected change in annual operating income by dropping T$-2$ and selling only T$-1.$

By what percentage would sales from T$-1$ have to increase in order to make up the financial loss from dropping T$-2?($Enter your answer as a percentage rounded to $2$ decimal places $($i$.$e$.0\mathrm{.}1234$ should be entered as $12\mathrm{.}34).)$

What is the required percentage increase in sales from T$-1$ to compensate for lost margin from T$-2,$ if total fixed costs can be reduced by $$58,500?($Enter your answer as a percentage rounded to $2$ decimal places $($i$.$e$.0\mathrm{.}1234$ should be entered as $12\mathrm{.}34).)$

$\backslash$table$[[,,,],[1.,,,\%],[2.,$Required $\%$ increase in sales from T$-1,,\%],[3.,$Required $\%$ increase in sales from T$-1,,]]$