Purple Reign is a clothing manufacturer/retailer based in Minneapolis, MN. The company started by making and...

 

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Purple Reign is a clothing manufacturer/retailer based in Minneapolis, MN. The company started by making and selling t-shirts with images of the musician Prince on them. Business picked up and the company began selling outfits that were inspired by Prince's wardrobe. Additionally, the company has entered into collaborations with current musicians and influencers to sell apparel inspired or designed by them. These artists or influencers include Post Malone, Olivia Rodrigo, and Harry Styles. 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 is now making the decision to continue to order boxes from box manufacturers or buy a corrugate machine that will manufacture boxes to customized sizes on demand. The company expects to have 180,000 orders in 2023, 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 $0.43. The box machine Purple Reign is considering costs $38,000 but lowers the variable cost of each box to $.25 because the company can 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 $3,500. Based on this information, and considering only the information we have based on 2023 projections, should Purple Reign purchase a box machine and make boxes on demand, or should the company continue to buy boxes from outside providers? For 2023, what is the best economic decision? What is the breakeven quantity based on the above information? Breakeven quantities are the quantity in which it would be the same amount of money to make or buy something. Purple Reign is a clothing manufacturer/retailer based in Minneapolis, MN. The company started by making and selling t-shirts with images of the musician Prince on them. Business picked up and the company began selling outfits that were inspired by Prince's wardrobe. Additionally, the company has entered into collaborations with current musicians and influencers to sell apparel inspired or designed by them. These artists or influencers include Post Malone, Olivia Rodrigo, and Harry Styles. 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 is now making the decision to continue to order boxes from box manufacturers or buy a corrugate machine that will manufacture boxes to customized sizes on demand. The company expects to have 180,000 orders in 2023, 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 $0.43. The box machine Purple Reign is considering costs $38,000 but lowers the variable cost of each box to $.25 because the company can 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 $3,500. Based on this information, and considering only the information we have based on 2023 projections, should Purple Reign purchase a box machine and make boxes on demand, or should the company continue to buy boxes from outside providers? For 2023, what is the best economic decision? What is the breakeven quantity based on the above information? Breakeven quantities are the quantity in which it would be the same amount of money to make or buy something.

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To determine the best economic decision for Purple Reign in 2023 lets calculate the total cost for b... View the full answer