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:

If the demand probabilities are 0.3, 0.5, and 0.2, which decision alternative will minimize the expected cost of the data processing operation?
What is the expected annual cost associated with that recommendation?

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Demand Staffing Options High Medium Low Own staff Outside vendor 900 650 350 Combination 800 650 650 600 500 500