Kang Corporation is considering three options for managing its data processing operation: continuing with its own...
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Kang 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. Demand Staffing Options High Medium Low Own staff 600 600 550 Outside vendor 850 550 250 Combination 750 600 450 (a) If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data processing operation? What is the expected annual cost associated with that recommendation? (Enter your answers in dollars.) EV(Own staff) = $ EV(Outside vendor) $ EV(Combination) = = $ The decision alternative that minimizes the expected cost is using a combination of its own staff and an outside vendor (b) Construct a risk profile for the optimal decision in part (a). (Submit a file with a maximum size of 1 MB.) Choose File No file chosen This answer has not been graded yet What is the probability of the cost exceeding $750,000? The expected annual cost associated with this recommendation is $ Kang 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. Demand Staffing Options High Medium Low Own staff 600 600 550 Outside vendor 850 550 250 Combination 750 600 450 (a) If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data processing operation? What is the expected annual cost associated with that recommendation? (Enter your answers in dollars.) EV(Own staff) = $ EV(Outside vendor) $ EV(Combination) = = $ The decision alternative that minimizes the expected cost is using a combination of its own staff and an outside vendor (b) Construct a risk profile for the optimal decision in part (a). (Submit a file with a maximum size of 1 MB.) Choose File No file chosen This answer has not been graded yet What is the probability of the cost exceeding $750,000? The expected annual cost associated with this recommendation is $
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