Lakin Corporation is considering a switch to level production. Cost efficiencies would occur under level production, and aftertax costs would decline by $36,000, but inventory would increase by $300,000. Lakin Corporation has to finance the extra inventory at a cost of 13.5%. Determine the extra cost or savings of switching over to level production. Should the company go ahead and switch to level production?

Select one:

a. The company should not switch to level production since the benefits outweigh the costs.

b. The company should switch to level production since the benefits outweigh the costs.

c. The company should switch to level production since the costs outweigh the benefits.

d. The company should not switch to level production since the costs outweigh the benefits.