Answer:
Judging from the payoff table below,the option that gives the lowest cost is outsourcing data processing to external vendor as this lead to total costs $570000 as against other two options that would incur $635000 respectively.
By choosing outsourcing,Hudson Corporation is saving $65000 ($635000-$570000).
Explanation:
The expected cost in each of the alternative is calculated by multiplying together the probability of state of nature with the corresponding payoff value.
Hence,the below is the payoff table:
Expected Value(own staff) =650(0.2)+650(0.5)+600(0.3)=$635
Expected value(Outsourcing)=900(0.2)+600(0.5)+300(0.3)=$570
Expected value(combined) =800(0.2)+650(0.5)+500(0.3)=$635