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. T - 1 Sales T- 2 $ 275,000 $ 320, 000 Variable costs: Cost of goods sold 85 , 000 160, 000 Selling & administrative 25,000 65 ,000 Contribution margin $ 165,000 $ 95 ,000 Fixed expenses: Fixed corporate costs 75,000 90 , 000 Fixed selling and administrative 27, 000 36,000 Total fixed expenses $ 102,000 $ 126,000 Operating income $ 63,000 $ (31, 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 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. 0.1234 should be entered as 12.34).) 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 by $51,000? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) Required % increase in sales from T-1 Required % increase in sales from T-1