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: Demand Staffing Options High Medium Low Own staff 650 650 600 Outside vendor 900 600 300 Combination 800 650 500 If the demand probabilities are 0.2, 0.5, and 0.3, and the table below shows the total cost of the different options, construct a risk profile for the optimal decision in the table. Option Total Cost Own Staff 635 Outside Vendor 570 Combination 635
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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 follows:
|
Demand |
|||
|
Staffing Options |
High |
Medium |
Low |
|
Own staff |
650 |
650 |
600 |
|
Outside vendor |
900 |
600 |
300 |
|
Combination |
800 |
650 |
500 |
If the demand probabilities are 0.2, 0.5, and 0.3, and the table below shows the total cost of the different options, construct a risk profile for the optimal decision in the table.
|
Option |
Total Cost |
|
Own Staff |
635 |
|
Outside Vendor |
570 |
|
Combination |
635 |
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