George's Dry Cleaning is considering a merger with Weezzie's Laundry Supply Stores. George's total operating costs of producing services are $670,000 for sales volume (SG) of $5.7 million. Weezzie's total operating costs of producing services are $240,000 for a sales volume (SW) of $2 million. a. Calculate the average cost of production for the two firms. (Round your answers to 2 decimal places.) George's Weezzie's Average cost b. For a sales volume of $7.7 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 11 percent. Needed reduction in production costs
George's Dry Cleaning is considering a merger with Weezzie's Laundry Supply Stores. George's total operating costs of producing services are $670,000 for sales volume (SG) of $5.7 million. Weezzie's total operating costs of producing services are $240,000 for a sales volume (SW) of $2 million. a. Calculate the average cost of production for the two firms. (Round your answers to 2 decimal places.) George's Weezzie's Average cost b. For a sales volume of $7.7 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 11 percent. Needed reduction in production costs
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:George's Dry Cleaning is considering a merger with Weezzie's Laundry Supply Stores.
George's total operating costs of producing services are $670,000 for sales volume (SG)
of $5.7 million. Weezzie's total operating costs of producing services are $240,000 for a
sales volume (SW) of $2 million.
a. Calculate the average cost of production for the two firms. (Round your answers to 2
decimal places.)
George's
Weezzie's
Average cost
b. For a sales volume of $7.7 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 11 percent.
Needed reduction in
production costs
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