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What is the expected cost of using the shared e-commerce

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A company is considering three alternative e-commerce providers to sell a new product online. The cost structures (cost variable based on units sold plus a fixed retainer) for the three providers are shown as follows. The selling price is unaffected by the choice of provider.

Dedicated e-commerce provider: $0.60x + $20,000
Semi-dedicated e-commerce provider: $0.40x + $50,000
Shared e-commerce provider: $0.20x + $120,000

The demand for units of the new product is described by the following probability distribution.

Demand       Probability
200,000        0.4
300,000         0.3
400,000         0.2
500,000         0.1

Problem 1: Ignoring the time value of money, what is the expected cost of using the shared e-commerce provider?

Reference no: EM132838371

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