Icon, Inc. produces a variety of products that carry the logos of teams in the Fortified Football League (FFL). The company recently paid the league $85,000 for the rights to market a popular player jersey and immediately began production. The following information is available:
Number of jerseys manufactured: 25,000
Cost of jerseys manufactured: $625,000
Amount of manufacturing costs paid to-date: $410,000
Number of jerseys sold to-date: 0
Estimated future marketing costs: $330,000
Anticipated selling price per jersey: $42
The FFL is about to file a lawsuit to stop jersey sales and is demanding another $50,000 from Icon for the manufacturing rights. Conversations with Icon's attorneys indicate that the league has a strong case and is likely to win the suit. If this situation arises, Icon will be unable to recover any amounts paid to the FFL.
Required:
A. Determine the overall profitability of the jersey product line if Icon settles the disagreement with the FFL and the anticipated sellout occurs.
B. Should the company pay the additional $50,000 demanded by the league or should the jersey program be dropped? Show computations to support your answer.

Question

Icon, Inc. produces a variety of products that carry the logos of teams in the Fortified Football League (FFL). The company recently paid the league $85,000 for the rights to market a popular player jersey and immediately began production. The following information is available:
Number of jerseys manufactured: 25,000
Cost of jerseys manufactured: $625,000
Amount of manufacturing costs paid to-date: $410,000
Number of jerseys sold to-date: 0
Estimated future marketing costs: $330,000
Anticipated selling price per jersey: $42
The FFL is about to file a lawsuit to stop jersey sales and is demanding another $50,000 from Icon for the manufacturing rights. Conversations with Icon's attorneys indicate that the league has a strong case and is likely to win the suit. If this situation arises, Icon will be unable to recover any amounts paid to the FFL.
Required: 
A. Determine the overall profitability of the jersey product line if Icon settles the disagreement with the FFL and the anticipated sellout occurs.
B. Should the company pay the additional $50,000 demanded by the league or should the jersey program be dropped? Show computations to support your answer.

Quizplus · Accepted Answer

The Answer of Icon, Inc. produces a variety of products that carry the logos of teams in the Fortified Football League (FFL). The company recently paid the league $85,000 for the rights to market a popular player jersey and immediately began production. The following information is available:
Number of jerseys manufactured: 25,000
Cost of jerseys manufactured: $625,000
Amount of manufacturing costs paid to-date: $410,000
Number of jerseys sold to-date: 0
Estimated future marketing costs: $330,000
Anticipated selling price per jersey: $42
The FFL is about to file a lawsuit to stop jersey sales and is demanding another $50,000 from Icon for the manufacturing rights. Conversations with Icon's attorneys indicate that the league has a strong case and is likely to win the suit. If this situation arises, Icon will be unable to recover any amounts paid to the FFL.
Required: 
A. Determine the overall profitability of the jersey product line if Icon settles the disagreement with the FFL and the anticipated sellout occurs.
B. Should the company pay the additional $50,000 demanded by the league or should the jersey program be dropped? Show computations to support your answer.

Icon, Inc Produces a Variety of Products That Carry the Logos