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Problem:

Company is ocnsidering a switch to level production. COst effeciencies would occur under level production and afer taxe cost would decline by 52800 but inventory cost would increase by 440000 they would have to finance the exra inventory at a cost of 13.5 percent

Required:

Question 1: Determine the extra cost or savings of switch over to level production (profit or loss)

Question 2: Should the company go ahead and switch to level production?

Question3: How low would intrest rates need to fall before level production would be feasibile?

Note: Please provide through step by step calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170776

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