A company is deciding if it should design a product in-house or outsource the design. Because this new product will not require the company to add resources, management is only interested in the annual contribution margin expected to be earned. The details of each option are as follows:

1. In-house
   • Plan to sell 196504 units per year
   • Each unit will sell for $14
   • The probability that the design will result in a variable cost of $8 for each unit is 0.5
   • If the company cannot reach its low cost target, the cost is estimated to be $10 for each unit
2. Outsource
   • Plan to sell 196504 units per year
   • Each unit will sell for $14
   • The probability that the design will result in a variable cost of $7 for each unit is 0.3
   • If the company cannot reach its low cost target, the cost is estimated to be $11 for each unit

To the nearest whole dollar, what is the expected profit if the company decides to design the item internally?

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