Dee's Dry Cleaning Is Considering a Merger with Larry's Laundry

question 85

Multiple Choice

Dee's Dry Cleaning is considering a merger with Larry's Laundry Supply Stores. Dee's total operating costs of producing services are $600,000 for sales volume of $4 million. Larry's total operating costs of producing services are $200,000 for a sales volume (JP) of $1 million. For a sales volume of $5 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 10 percent.

• A) Decrease of $500,000
• B) Decrease of $300,000
• C) Decrease of $100,000
• D) Decrease of $200,000

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Definitions:

Libel

A written or published false statement that is damaging to a person’s reputation; a form of defamation.

Actual Damages

Reputational injury and other harm such as emotional distress.

Proof

Evidence or argument establishing a fact or the truth of a statement in the context of legal proceedings or other formal inquiries.

Preponderance

The greater weight of evidence, or evidence that is more convincing than the evidence offered in opposition to it.