Reference no: EM132193372

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 700 600 500 Outside vendor 900 650 400 Combination 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 processing operation? What is the expected annual cost associated with that recommendation? Expected annual cost = $ 665 (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 =