The director of social services of a county has learned that the state has manda
ID: 415783 • Letter: T
Question
The director of social services of a county has learned that the state has mandated additional information requirements. This will place an additional burden on the agency. The director has identified three acceptable alternatives to handle the increased workload. One alternative is to reassign present staff members, the second is to hire and train two new workers, and the third is to redesign current practice so that workers can readily collect the information with little additional effort. An unknown factor is the caseload for the coming year when the new data will be collected on a trial basis. The estimated costs for various options and caseloads are shown in the following table Reassign staff New staff Redesign collection CASELOAD Moderate High Very High 60 60 50 S50* 60 40 85 60 90 *Cost in $ thousands After contemplating the caseload question, the director of social services has decided that reasonable caseload probabilities are 0.10 for moderate, 0.30 for high, and 0.60 for very highExplanation / Answer
a) Expected cost of Reassign staff = 50*.1+60*.3+85*.6 = 74
Expected cost of New staff = 60*.1+60*.3+60*.6 = 60
Expected cost of Redesign collection = 40*.1+50*.3+90*.6 = 73
Expected cost of New Staff is the minimum.
c) opportunity loss is calculated by subtracting the minimum cost for particular caseload probability from respective probability. For example, opportunity loss for reassign for moderate probability = 50 - MIN{50,60,40} = 50 - 40 = 10
Resulting opportunity loss table follows:
Expected Value of Perfect Information (EVPI) = Minimum EOL = MIN{19,5,18}
= 5
Moderate High Very high EOL Reassign 50-40=10 60-50=10 85-60=25 10*.1+10*.3+25*.6=19 New staff 60-40=20 60-50=10 60-60=0 20*.1+10*.3+0*.6=5 Redesign 40-40=0 50-50=0 90-60=30 0*.1+0*.3+30*.6=18