Wisconsin Snowmobile Corp. is considering a switch to level production. Cost efficiencies would occur under level production, and aftertax costs would decline by $42,000, but inventory would increase by $420,000. Wisconsin Snowmobile would have to finance the extra inventory at a cost of 11.5 percent.

a-1. Determine the extra cost or savings of switching over to level production.

a-2. Should the company go ahead and switch to level production?

• Yes

• No

b. How low would interest rates need to fall before level production would be feasible? (Input your answer as a percent rounded to the nearest whole number.