Exercise $11-27($Algo$)$ Product$-$Line Profitability Analysis $[$LO $11-5]$

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.

Required:

Find the expected change in annual operating income by dropping $T-2$ and selling only $T-1.$

By what percentage would sales from T$-1$ have to Increase in order to make up the financlal loss from dropping T$-2?($Enter your

answer as a percentage rounded to $2$ decimal places $($I$.$e$.0\mathrm{.}1234$ should be entered as $12\mathrm{.}34).)$

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 $($l$.$e$.0\mathrm{.}1234$ should be entered as $12\mathrm{.}34).)$