Percentage values of the average costs of the merged firms

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Carl's Tires is planning to merge with Joe's Body Shop to offer a combined auto repair service shop. Carl's Tires has total costs of $1,500,000 and sales of $2,000,000, while Joe's Body Shop features costs of $2,200,000 and sales of $4,000,000. The combined firms will be able to achieve economies of scope sufficient to reduce costs by $400,000 while maintaining sales at current levels. Calculate the difference between the percentage values of the average costs of the merged firms and the combined average costs of two nearby competitors. These competitors continue to sell tires and do auto repair separately, having total costs of $2,000,000 and sales of $2,500,000, $2,400,000, and $3,200,000, respectively.

A. 34 percent

B. 23.56 percent

C. 28.45 percent

D. 25.36 percent

Reference no: EM131524162


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