business has increased such that a few years ago purple reign brought warehousing and distribution in-house to package and ship customer orders. with business continuing to expand, the company now is making the decision to continue to order boxes from box manufacturers or buy a corrugate machine that will manufacturer boxes to customized sizes on demand. the company expects to have 120,000 orders in 2022 and each order will use one box. when buying boxes from manufacturers, the company needs to buy different size boxes to account for different orders. this pushes the average cost of each box to $0.47. the box machine purple reign is considering costs $30,000, but lowers the variable cost of each box to $0.22 because the company is able to manufacture each box on-demand. if the company buys boxes from manufacturers, purple reign likes to have a contract with each to ensure needs are met to certain specifications. purple reign can have all contracts negotiated for $6,000. based on this information, and considering only the information we have based on 2022 projects, should purple reign purchase a box machine and make boxes on demand or should the company continue to buy boxes from outside providers? for 2022, what is the best economic decision?
