Big Al Athletic Apparel annually sells 20,000 University of West Florida branded cotton T-shirts through distributors who then sell the shirts for $15 to retailers like Dicks Sporting Goods who then sell them on to consumers for $25 each. Big Als costs of goods are $5 per shirt and they are required to pay a licensing fee to UWF for $1 for every shirt that they sell via distributors. This fee is only charged on those shirts sold to the distributors. The distributors margins are 20%.

1. Create a Value Chain for the shirts by filling in the blanks

Consumer Price	$25
Dicks Purchase Price
Dicks Margin
Distributor Purchase Price
Distributor Margin
Big Als Gross Margin ($)
Big Als Gross Margin (%)
Big Als Contribution Margin ($)
Big Als Contribution Margin (%)

2. After a very disappointing football and basketball season for the Gators, Big Als is considering lowering the price to increase T-shirt demand. If Big Als decided to reduce its price on the T-Shirts by $50, how additional units would it need to break even?

Multiple Choice

1. Big Als new contribution margin after the price discount is:

1. $6
2. $4.50
3. $3.50
4. $2.50
5. None of these

2. What is the incremental number of units that Big Als needs to sell to break even on the price discount?

1. 20,000
2. 14,286
3. 34,286
4. 50,000
5. None of these