Question

Jenny’s Day Care is considering a merger with Lionel’s Diaper Manufacturers. Jenny’s total operating costs of producing services are $595,000 for sales volume (SJ) of $2.4 million. Lionel’s total operating costs of producing services are $340,000 for a sales volume (SL) of $1,400,000.
a. Calculate the average cost of production for the two firms.
b. For a sales volume of $3.8 million, calculate the reduction in production costs the merged firms need to experience such that the total average cost (ACJennyLionel) for the merged firms is equal to 20 percent.



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  • CreatedSeptember 23, 2014
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