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Bargainmart is an international retail store. Bargainmart's managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs
Bargainmart is an international retail store. Bargainmart's managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs Bargainmart $1,500,000 per month and $40 per order. Bargainmart has two options, a partially automated B2B and a fully automated B2B system. The partially automated B2B system will have a fixed cost of $9,000,000 per month and a variable cost of $20 per order. The fully automated B2B system has a fixed cost of $19,800,000 per month and a variable cost of $10 per order. Based on data from the past 2 years, Bargainmart has determined the following distribution on monthly orders: (Click the icon to view the data.) Read the requirements. Requirements 1 & 2. Prepare a table showing the cost of each plan for each quantity of monthly orders. What is the expected cost of each plan? Determine the monthly cost of each order level under the current plan and then compute the expected cost. Current plan Total monthly cost of orders x Probability Total expected cost of orders Order level = X II 300,000 orders 500,000 orders x II 700,000 orders II Total expected cost of plan Monthly Number of Orders Probability 0.15 300,000 orders 500,000 orders 0.25 700,000 orders 0.35
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