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, 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 statement, he agreed that T-2 should be dropped. If this is done, sales of T-1 are expected to increase by 10% next year; the firms cost structure will remain the same.

	T-1	T-2
Sales	$280,000	$324,000
Variable Cost of Goods Sold	86,000	162,000
Contriubtion Margin	$194,000	$162,000
Expenses:
Fixed Corporate Costs	76,000	91,000
Variable Selling and Administration	12,000	66,000
Fixed Selling and Administration	28,000	37,000
Total Expenses	$116,000	$194,000
Operating Income	$78,000	$(32,000)

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)

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 $52,500? (Enter your answer as a percentage rounded to 2 decimal places)