Problem 4-07 Hudson Corporation is considering three options for managing its data processing operation continuing with

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Problem 4 07 Hudson Corporation Is Considering Three Options For Managing Its Data Processing Operation Continuing With 1 (41.95 KiB) Viewed 245 times

Problem 4-07 Hudson Corporation is considering three options for managing its data processing operation continuing with its own staff, hiring an outside vendor to do the managing (referred to as outsourcing), or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option in thousands of dollars) depends on demand as follows: Staffing Options Ownstall Outside vendor Combination Demand High Medium 650 650 900 800 650 Low 600 300 500 600 a. If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data processing operation? Own stall What is the expected annual cost associated with that recommendation (in thousands of dollars)? Expected annual cost = $570,000 b. Construct a risk profile for the optimal decision in part The input in the box below will not be graded, but may be reviewed and considered by your instructor. Demand 0.000 Milan 03 023 From the best here the mode What is the probability of the cost exceeding $700,000? If required, round your answer to two decimal places. Probability = 20%