George's Dry Cleaning Is Considering a Merger with Weezzie's Laundry

question 28

Multiple Choice

George's Dry Cleaning is considering a merger with Weezzie's Laundry Supply Stores. George's total operating costs of producing services are $790,000 for sales volume (SG) of $4.7 million. Weezzie's total operating costs of producing services are $202,000 for a sales volume (SW) of $2.3 million. For a sales volume of $7 million, calculate the reduction in production costs the merged firms need to experience such that the total average cost (TAC) for the merged firms is equal to 12 percent.

• A) $840,000
• B) $710,000
• C) $175,000
• D) $152,000