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-2 $ 260,000 T-1 $ 200,000 70,000 20,000 $ 110,000 Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate coats Fixed selling and administrative Total fixed expenses Operating income 130,000 50,000 $ 80,000 58,700 14,300 $ 73,000 S 37,000 76,300 18,700 $ 95,000 S (15,000) 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-27 (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 $45,000? (Enter your answer as a percentage rounded to 2 decimal places (.e. 01234 should be entered as 12.34).) $ 1. Net income on discontinuing T-2 2 Required % increase in sales from T-1 3. Required % increase in sales from T-1 80,000 1.00% %