Jewelry Designs Is Considering a Merger with Beads Supply Stores

Jewelry Designs is considering a merger with Beads Supply Stores. Jewelry's total operating costs of producing services are $300,000 for sales volume of $2 million. Beads' total operating costs of producing services are $125,000 for a sales volume (JP) of $2.25 million. For a sales volume of $4.25 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 8 percent.

A) Decrease of $340,000
B) Decrease of $85,000
C) Decrease of $40,000
D) Decrease of $25,000