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 lines that has only two products, T1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T2 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 T2 should be dropped. If T2 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. Tl T2 $ Sales 230,000 $ 284,000 Variable costs: Cost of goods sold 76,000 142,000 Selling & administrative 27,500 56,000 Contribution margin 126,503 $ 86,000 Fixed expenses: Fixed corporate costs 66,000 81,000 Fixed selling and administrative 18,000 27,000 Total fixed expenses $ 84,000 $ 108,000 Operating income $ 42,500 (22,000? Required: 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 T1 have to increase in order to make up the financial loss from dropping T2? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) 3. What is the required percentage increase in sales from T-l to compensate for lost margin from T2, if total fixed costs can be reduced by $48,500? (Enter your answer as a percentage rounded to 2