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 650 600 500 Outside vendor 900 650 350 Combination 800 650 500 (a) If the demand probabilities are 0.3, 0.5, and 0.2, which decision alternative will minimize the expected cost of the data warehouse? 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 = $ 570000 (b) Construct a risk profile for the optimal decision in part (a). The input in the box below will not be graded, but may be reviewed and considered by your instructor. blank What is the probability of the cost exceeding $625,000 ? If required, round your answer to two decimal places. Probability = 0.30

Answer 1