Barbour Corporation, located in Buffalo, New York, is a retailer of hightech products and is known for its excellent quality and innovation. Recently the firm conducted a relevant cost analysis of one of its product 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 statement, he agreed that T-2 should be dropped. If this is done, sales of T-1 are expected to increase by 10% next year; the firms cost structure will remain the same.

	T1	T2
SALES	$295,000	$336,000
VARIABLE COGS	89,000	168,000
CONTRIBUTION MARGIN	206,000	168,000
EXPENSES:
FIXED CORPORATE COSTS	79,000	94,000
VARIABLE SELLING / ADMIN	29,000	69,000
FIXED SELLING / ADMIN	31,000	40,000
TOTAL EXPENSES:	139,000	203,000
OPERATING INCOME/LOSS	67,000	(35,000)

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

2. By what percentage would sales from T-1 have to increase in order to make up the financial loss form dropping T-2? Round to 2 decimal places.

3. 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 to $57,000? Round to 2 decimal places.