Phanatix, Inc. produces a variety of products that carry the logos of teams in the Southern Football League (SFL). The company recently paid the league $85,000 for the rights to market a popular player jersey and immediately began production. Anticipated selling price per jersey is $42, Currently all 25,000 jerseys have been produced but there have been none sold. Cost of jerseys manufactured is $625,000 but costs paid to-date are $410,000. Estimated future marketing costs: $330,000.The SFL is about to file a lawsuit to stop jersey sales and is demanding another $50,000 from Phanatix for the manufacturing rights. Conversations with Phanatix's attorneys indicate that the league has a strong case and is likely to win the suit. If this situation arises, Phanatix will be unable to recover any amounts paid to the SFL.

Phanatix's sales department anticipates very strong demand and a sellout of all jerseys manufactured. 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.

Relevant Revenues Keep Drop and Costs A B A-B Revenues Less: Costs Manufacturing Costs Rights Promotion Costs Total costs Profit