Calculation of Average Costs with Economies of Scope Crib World is considering a merger with Tots Supply Stores. Crib's total operating costs of producing services are $250,000 for sales volume of $1.25 million. Tots' total operating costs of producing services are $210,000 for a sales volume (J_P) of $900,000. Calculate the average cost of production for the Crib and Tots firms, respectively.

Question

Quizplus · Accepted Answer

The average cost of production for Crib is $250,000/$1.25 million = 20%. The average cost of production for Tots is $210,000/$900,000 = 23.33%.