If the demand probabilities are 0.4, 0.25, and 0.35, which decision alternative will minimize the expected cost of the data processing operation? Own Staff What is the expected annual cost associated with that recommendation? If required, round your answer to the nearest thousand of dollars. Expected annual cost
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 | 600 | 550 | 350 |
| Outside vendor | 900 | 650 | 450 |
| Combination | 700 | 600 | 400 |
a. If the demand probabilities are 0.4, 0.25, and 0.35, which decision alternative will minimize the expected cost of the data processing operation? Own Staff
What is the expected annual cost associated with that recommendation? If required, round your answer to the nearest thousand of dollars. Expected annual cost = $ ___________
Step by step
Solved in 2 steps with 2 images
