Application Development: Build In-House or Outsource Use the information in the table below to decide whether you want to build the application in-house or outsource it. Calculate expected value of each outcome and show your calculations (Probability X Impact). Explain the best option based on the outcome, and why. During the requirements gathering for the project, the requirements were not completed accurately. Therefore, there is a risk that the final product will not pass the customer-acceptance test. Although doing the project in-house will be expensive, the chances of user acceptance are high, thus preventing a costly rework of the project. Cost to build the application in-house. $125,000 Cost to outsource to a contractor $90,000 Probability of passing the user acceptance test. 85% Probability of passing the user acceptance test if work is outsourced. 15% $40,000 Cost of rework after the user acceptance test if build in-house. Cost of rework after the user acceptance test if $50,000 work is outsourced.

Application Development: Build In-House or Outsource Use the information in the table below to decide whether you want to build the application in-house or outsource it. Calculate expected value of each outcome and show your calculations (Probability X Impact). Explain the best option based on the outcome, and why. During the requirements gathering for the project, the requirements were not completed accurately. Therefore, there is a risk that the final product will not pass the customer-acceptance test. Although doing the project in-house will be expensive, the chances of user acceptance are high, thus preventing a costly rework of the project. Cost to build the application in-house. $125,000 Cost to outsource to a contractor $90,000 Probability of passing the user acceptance test. 85% Probability of passing the user acceptance test if work is outsourced. 15% $40,000 Cost of rework after the user acceptance test if build in-house. Cost of rework after the user acceptance test if $50,000 work is outsourced.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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