Crib World Is Considering a Merger with Tots Supply Stores

question 87

Multiple Choice

Crib World is considering a merger with Tots Supply Stores. Crib's total operating costs of producing services are $250,000 for sales volume of $1.25 million. Tots' total operating costs of producing services are $210,000 for a sales volume (JP) of $900,000. For a sales volume of $2.15 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 17.5 percent.

• A) Decrease of $376,250
• B) Decrease of $83,750
• C) Decrease of $127,500
• D) Decrease of $87,500

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