One Day Dry Cleaning Is Considering a Merger with Speedy's

question 21

Multiple Choice

One Day Dry Cleaning is considering a merger with Speedy's Laundry Supply Stores. One Day's total operating costs of producing services are $450,000 for sales volume (SG) of $3.75 million. Speedy's total operating costs of producing services are $200,000 for a sales volume (SW) of $1.70 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 11 percent.

• A) $100,000
• B) $200,000
• C) $450,000
• D) $550,000