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. T-1 $270,000 T-2 $316,000 84,000 37,500 $148,500 158,000 64,000 $ 94,000 Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income 74,000 26,000 $100,000 $ 48,500 89,000 35,000 $124,000 $(30,000) 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 (.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 $49,500? (Enter your answer as a percentage rounded to 2 decimal places (.e. 0.1234 should be entered as 12.34).) 1. Net loss on discontinuing T-2 2. Required % Increase in sales of T-1 3. Required % increase in sales from T-1 % %