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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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
Transcribed Image Text:Peter's TV Supplies is considering a merger with Jan's Radio Supply Stores. Peter's total
operating costs of producing services are $250,000 for a sales volume (Sp) of $4.5
million. Jan's total operating costs of producing services are $50,000 for a sales volume
(S) of $550,000.
a. Calculate the average cost of production for the two firms. (Round your answers to 2
decimal places.)
Peter
Jan
Average cost
b. If the two firms merge, calculate the total average cost (TAC) for the merged firm
assuming no synergies. (Round your answer to 2 decimal places.)
Total average
cost
%
c. Suppose, instead, that synergies in the production process result in a cost of
production for the merged firms totaling $270,000 for a sales volume of $5,050,000.
Calculate the total average cost (TAC) for the merged firm. (Round your answer to 2
decimal places.)
Total average
cost
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