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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 folliows: Demand Staffing OptionsHigh Medium Own staff Outside vendor800600 Combination Low 650 450 300 700 600 400 a. If the demand probabilities are 0.35, 0.25, and 0.4, which decision alternative will minimize the expected cost of the data processing operation? What is the expected annual cost associated with that recommendation? If rerequired,round your answer to the nearest dollar Expected annual cost-$ b. Construct a risk profile for the optimal decision in part (a). Cost (in thousands of dollars) Propability 0.35 0.25 0.4 1.0

Answer 1

answer:

a)

b)