2025 Q7An events management company has been awarded a contract to construct the stages for a music festival. If the construction of the stages is delayed the contract says that a penalty of £25,000 will be charged.
For the purposes of the cost-benefit analysis, the company has assumed only two events will cause a delay: a stage structure failing, or staff failing to attend the site. The probability of no delay is 0.76.
(a) Calculate the expected cost of a delay.
The company is considering using the following control measures:
- Control Measure 1: Pay another company to have staff on standby to attend the site in the case of their staff being unable to attend, at a cost of £1000.
- Control Measure 2: Have a spare stage on standby in case of a failure, at a cost of £1500.
The probability of staff failing to attend the site is 0.2.
The probability of a stage structure failing is 0.05.
(b) Calculate the expected cost if control measure 2 is taken.
The expected cost if control measure 1 is taken is £2250. The company will only use one control measure.
(c) Explain which control measure the company should use to minimise expected costs.