Question
International Mart is an international retail store. International Mart's managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The
International Mart is an international retail store. International Mart's managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs International Mart $2,000 per month and $55 per order. International Mart has two options, a partially automated B2B and a fully automated B2B system. The partially automated B2B system will have a fixed cost of $6,000 per month and a variable cost of $45 per order. The fully automated B2B system has a fixed cost of $14,000 per month and a variable cost of $30 per order. Based on data from the past two years, International Mart has determined the following distribution on monthly orders: Monthly Number of Orders 300 500 650 Probability 0.35 0.45 0.20 Required: 1. Prepare a table showing the cost of each plan (i.e., the current system, the partially automated B2B system, and the fully automated B2B system) for each quantity of monthly orders. 2. What is the expected cost of each plan? 3. Which action should International Mart take?
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