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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

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 asoutsourcing), 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:

Staffing Options

Demand

High

Medium

Low

Own staff

650

650

600

Outside vendor

900

600

300

Combination

800

650

500

If the demand probabilities for high, medium and low are 0.2, 0.5, and 0.3, respectively.

Construct a decision tree for this problem.

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