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Probabilities of completing the project within various time frames when using each of the three options.

WZ Inc. is an event planning and promotion company who organizes events of different sizes for their clients. Planning and managing events have more than their fair share of frustrations and stressors. From last-minute changes to procrastinating clients, the profession isn’t for the faint of heart. Luckily, executing a successful event makes everything else (like the crazy long hours) worth it. There is a major event planning project due in 8 weeks. The penalty for planning the event late is $14 000 per week, since any delay will cause the venue to open later than anticipated, and cost the client significant returns. If the company uses its inside event planner to complete the planning, it will have to pay them overtime for all work. WZ Inc. has estimated that it will cost $12 000 per week (wages and overhead), including late weeks, to have the event planners finish the job. WZ is also considering outsourcing the planning work to other event planning companies. A bid of $92 000 has been received for the completed event plan. Yet another option for completing the job is to conduct a joint planning by having a third party finish all the preliminary work at a cost of $56 000. WZ would then complete the rest of the planning at an estimated cost of $30 000.
WZ has estimated the following probabilities of completing the project within various time frames when using each of the three options. Those estimates are shown in the following table:

Probability of completing the planning
Alternatives
On Time
1 Week Late
2 Week Late
3 Week Late
Internal Planner
.4
.5
.1

Outsourcing
.2
.4
.3
.1
Joint Work
.1
.3
.4
.2

What is the best decision based on an expected monetary value criterion?

Solution:

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