arbour 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% next year, but the firms cost structure will remain the same. T-1 T-2 Sales $ 260,000 $ 308,000 Variable costs: Cost of goods sold 82,000 154,000 Selling & administrative 22,000 62,000 Contribution margin $ 156,000 $ 92,000 Fixed expenses: Fixed corporate costs 72,000 87,000 Fixed selling and administrative 24,000 33,000 Total fixed expenses $ 96,000 $ 120,000 Operating income $ 60,000 $ (28,000 )