Wisconsin Snowmobile Corporation is considering a switch to level production. Cost efficiencies would occur under level production, and aftertax costs would decline by $36,900, but inventory would increase by $410,000. Wisconsin Snowmobile would have to finance the extra inventory at a cost of 10.5 percent.

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

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