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% next year, but the firm's cost structure will remain the same.

Barbour Corporation, located In Buffalo, New York, Is a retaller 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 firm's cost structure will remain the same. I-1 I-2 Sales $220, 000 $276, 000 Variable costs: Cost of goods sold 74, 000 138, 000 Selling & administrative 25, 000 54, 000 Contribution margin $121, 000 $ 84, 000 Fixed expenses; Fixed corporate costs 64, 000 79,000 Fixed selling and administrative 16, 000 25, 000 Total fixed expenses $ 80,000 $104, 000 Operating income $ 41,000 $ (20, 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 (L.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 $45,500? (Enter your answer as a percentage rounded to 2 decimal places (L.e. 0.1234 should be entered as 12.34).) 1. 2 Required % increase in sales of T-1 3. Required % increase in sales from T-1