Question $6.$

Icon, Incorporated 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:

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

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.