Tipton One Stop Deoorating sells paint and paint aupplies, carpet, and wallpaper at a single store location in suburban Des Moines. Although the company has been very profitable over the jears, management has seen a significant decline in wallpaper sales and earningt Much of this decline is artributable to the Internet and to companies that advertise deeply diseounted prices in magazines and offer customers fiee shipping and tollfiee telephione numbers. Recent figures follow: Tiptos is studying whether to drop wallpaper besause of the changing market and accomparying loss. If the line is dropped, the following changes are expected to oscur: - The vacated spoce will te remodeled at a cost of $12,400 and witt be devoted to an expanded line of high-end carpet. Sales of carpet are equeted to increase by $120,000, and the line's overall contribution margin ratio will rise by five percentage points. - Tipton can cut wallpoper's fixed costs by 40 percent. Remaining fited costs will continue to be incurred. - Customen who purchased wallpoper often bought paint and paint supplies. Sales of paint and paint supplies are expected to fall by 20 percent. - The firm will incresse advertising expenditures by $25,000 to promote the expanded carpet line. Required: 1. Should Tipton close its wallpaper operation? Show computations to suppost jour answer. 2. Assume that Tipton's wallpaper inventory at the time of the closure decision ansounted to $23,700. How would jou have treated this additional information in anaking the decision? 3. Whot sdvantages might Internet- and magazine-based firms have over Tipton that would allow these organizations to offer deeply dicocunied prices-prices far beliow what Tipton can offer