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Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $51,000 as follows: Drafty ModelSales revenue$180,000Less: Variable costs126,000Contribution margin$54,000Less: Direct

Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $51,000 as follows:

Drafty ModelSales revenue$180,000Less: Variable costs126,000Contribution margin$54,000Less: Direct fixed costs43,000Segment margin$11,000Less: Common fixed costs62,000Net operating income (loss)$(51,000)

Eliminating the Drafty product line would eliminate $43,000 of direct fixed costs. The $62,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines.

Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much?

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