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Calculation of Average Costs with Economies of Scope Jan's Bakery

question 34

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Calculation of Average Costs with Economies of Scope Jan's Bakery is considering a merger with Tina's Cookies. Jan's total operating costs of producing services are $300,000 for a sales volume of $2 million. Tina's total operating costs of producing services are $75,000 for a sales volume of $600,000. If the two firms merge, calculate the total average cost for the merged firm assuming no synergies.


Definitions:

Keflex

A brand name for the antibiotic cephalexin, used to treat a wide variety of bacterial infections by inhibiting cell wall synthesis.

Antibiotic

A type of medication used to treat bacterial infections by killing or inhibiting the growth of bacteria.

Analgesic

A type of medication that is used to relieve pain without causing loss of consciousness.

Antipyretic

A medication category aimed at lowering or avoiding fever.

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