George's Dry Cleaning Is Considering a Merger with Weezzie's Laundry

George's Dry Cleaning is considering a merger with Weezzie's Laundry Supply Stores. George's total operating costs of producing services are $590,000 for sales volume (S_G) of $4.7 million. Weezzie's total operating costs of producing services are $152,000 for a sales volume (S_W) of $2.3 million. For a sales volume of $7 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 9%.

A) $97,000
B) $101,000
C) $112,000
D) $128,000

Correct Answer:

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