Calculation of Average Costs with Economies of Scope Dee's Dry

question 12

Multiple Choice

Calculation of Average Costs with Economies of Scope 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 (J_P) 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:

Environmental Forces

External factors, including social, economic, technological, competitive, and regulatory forces, that can affect an organization's operations and business decisions.

Marketing Activities

Actions undertaken by a company to promote and sell its products or services, including advertising, sales promotions, and public relations.

Marketing Department

A division within a company responsible for promoting products or services, brand management, and market research.

Crossover SUV

A type of sports utility vehicle that features a unibody construction, blending features of passenger cars with those of traditional SUVs for increased efficiency and comfort.