Kaylin: I’m willing to compute the effect, but I’d like to suggest one additional feature. Currently, we have a
policy to carry about 25 tons of LLHC in inventory. Our current costing system totally ignores the cost of
carrying this inventory. Since it costs us $1,665 to produce each ton of this product, we are tying up a lot of
money in inventory—money that could be invested in other productive opportunities. In fact, the return lost
is about 16 percent per year. This cost should also be assigned to the units sold.