You work for Mango Computer Company that is considering a new product development project to develop a new tablet computer. As part of their planning process, the development team is considering whether or not to outsource the production of the screen. The estimated cost of the screen depends on the market demand of the new tablet that is uncertain at this time. If the market demand is high, the development team estimates that they can invest in special robotic equipment that will result in a reduced variable (unit) cost.

You have been asked to consider the problem of outsourcing the production of the screen. After considerable analysis, you have estimated the following unit costs as a function of future demand (low, average, or high) of the tablet computer and the probability estimates of future demand for the next five years.

Future Demand for New Product Low Average High Produce In-House Outsource Probability 0.1 0.6 0.3