Flowers Galore Is Considering a Merger with Balloons N More

question 6

Multiple Choice

Flowers Galore is considering a merger with Balloons N More. Flowers Galore's total operating costs of producing services are $800,000 for a sales volume of $3 million. Balloons' total operating costs of producing services are $60,000 for a sales volume of $100,000. If the two firms merge, calculate the total average cost for the merged firm assuming no synergies.

• A) 26.67 percent
• B) 27.74 percent
• C) 43.34 percent
• D) 60.00 percent

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Definitions:

Proportionate Interest Goodwill Method

An accounting method used to calculate goodwill in the consolidation of financial statements, based on the parent company's proportionate share in the net assets of the subsidiary.

Goodwill Impairment Losses

are losses recognized when the carrying amount of goodwill exceeds its recoverable amount.

Indirect NCI

Refers to a non-controlling interest in an entity that is owned through another subsidiary rather than directly.

Allocation of the Dividend

The process of distributing a portion of a company's earnings, decided by the board of directors, to its shareholders in proportion to their shareholding.