20. The manufacturing capacity of Ritter Rotator Companys plant facility is 60,000 rotors per quarter. Operating results for a recent representative quarter are as follows:

Sales (36,000 units) Variable manufacturing and selling costs Contribution margin Fixed costs Operating income

$360,000 198,000 $162,000 99,000 $63,000

A foreign distributor has offered to buy 30,000 units at $9 per unit during the upcoming quarter. Domestic demand is expected to remain the same as it was in the representative quarter.

A. Determine the impact on operating income if Ritter accepts the offer from the foreign distributor. If there are capacity constraints, assume that Ritter must forego sales to domestic customers (i.e., the foreign company will not accept a partial order). Assume that there are no incremental fixed costs associated with the order. Show computations to support your answer and be sure to clearly indicate whether the impact is positive or negative.

B. Assume that Ritter decides to run an extra shift so that it can accept the foreign order without affecting domestic orders. The proposed extra shift would increase capacity 25% to 75,000 units and would require an additional $25,000 in fixed costs. Determine the impact on operating income if Ritter accepts the offer from the foreign distributor under these conditions. Show computations to support your answer, being certain to clearly indicate the direction of the impact (i.e., positive or negative).