The Finlandia Paper Company presently sells large rolls of paper weighing 2,000 kilograms to wholesalers for €1,000 apiece. The wholesalers cut the paper into letterset paper and package the paper in 2-kilogram packages. These packages are sold to printers for €2/package. There is no waste in the cutting process. The Finlandia Company currently produces 10 million kilograms of paper annually at a fixed cost of €1 million and a variable cost of €0.30 per kilogram. If Finlandia by-passed the wholesalers and cut its own paper for sale directly to printers, Finlandia would have to add equipment and personnel such that the annual incremental fixed costs would be €3 million. Incremental variable costs would be €0.10 per kilogram.

Should Finlandia cut its own paper and by-pass the wholesalers?