Question

Hudson Corporation is considering three options for managing its data warehouse: 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: Demand Staffing Options High Medium Low Own staff Outside vendor 900 650 400 Combination 700 600 500 700 600 300 (a) If the demand probabilities are 0.5, 0.2, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? -select your answer What is the expected annual cost associated with that recommendation? Enter your answer in thousands dollars. For example, an answer of $200 thousands should be entered as 200,000 Expected annual cost (b) Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $625,000? If required, round your answer to two decimal places. Probability

Answer 1

@) J Coun staff)s(O . 5)(#oo) tO2) C6oo)re.3) C50m) - 62O ブ00 . o5) C100) on aboue Expectadl valu fo Combinatio thna the ceueet opti is (Csnirxi ,-the cost is mini muum belorw porobabi 0-5 300 6OO medium o2 Po the table,ue can Soy that$560, oo woud lia above Lous cost valiun e the