Calculation of Average Costs with Economies of Scope Building Supplies is considering a merger with Tools and More. Building's total operating costs of producing services are $4 million for a sales volume of $20 million. Tools' total operating costs of producing services are $1 million for a sales volume of $5 million. Suppose that synergies in the production process result in a cost of production for the merged firms totaling $4.8 million with total sales remaining unchanged. Calculate the total average cost for the merged firm.

20.0 percent

9.6 percent

40.0 percent

19.2 percent