PLEASE EXPLAIN HOW TO GET THE BREAK EVEN INCREMENT IN DETAIL !!!!

ALSO CHECK WORK PERFORMED THUS FAR.

Thank you.

Marketing Financials Homework

Please answer each question in the space provided. I do not need to see your work.

Background

Big Al's Athletic Apparel annually sells 39,000 University of Florida branded cotton T-shirts through distributors who then sell the shirts for $20 to retailers like Dick's Sporting Goods who then sell them on to consumers for $30 each. Big Al's costs of goods are $10 per shirt and they are required to pay a licensing fee to UF for $2 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. Createa Value Chain for the shirts by filling in the blanks

Consumer Price	30
Dick's Purchase Price	20
Dick's Margin	10
Distributor Purchase Price	16
Distributor Margin	4
Big Al's Gross Margin ($)	6
Big Al's Gross Margin (%)	60%
Big Al's Contribution Margin ($)	4
Big Al's Contribution Margin (%)	33%

1. Due to rising costs, Big Al's distributors have demanded a 25% margin. The retail price will remain fixed at $30, so Big Al's will be taking a margin hit.

Multiple Choice

1. Assuming everything remains the same, what is Big Al's new contribution margin after the distributor's increase their margin?
2. $6
3. $5
4. $4
5. $3
6. None of these

1. What is the incremental number of units that Big Al's needs to sell to break even now that the distributor's margin has increased?
2. 0
3. 9,750
4. 13,000
5. 19,500
6. 52,000
7. None of these

1. Big Al's is adapting to consumer trends and developing a wicking, breathable T shirt made of polyester and elastane blend material to keep consumers cool on the hottest of days (especially important in Florida). The shirt will cost $20 to produce and Big Al's expects Dick's will be selling it for $48. First year sales of the new shirt are expected to be 25,000, with 30% of those sales coming from the existing T shirt. Distribution will remain the same. Distributors will be taking 25% (remember, they raised their margin requirements) and retailers will take the same percentage margin as they do on the base cotton T Shirt. Big Al's will also have to continue paying UF a $2 licensing fee for every shirt sold to distributors. Based strictly on economics, would you advise Big Al's to sell these shirts? Why or Why Not?

Sell or Not Sell?_______________________________________________________________

Why or Why Not? _____________________________________________________________