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Question: Wisconsin Snowmobile Corp. is considering a switch to level production. Cost efficiencies would occur under level production, and after tax costs would decline by $30,000, but inventory costs would increase by $250,000. Wisconsin Snowmobile would have to finance the extra inventory at a cost of 13.5 percent.

a. Should the company go ahead and switch to level production?

b. How low would interest rates need to fall before level production would be feasible?

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