Expected Values

Information:

1)the company hires all their Plant & machinery (P&M)
2)The company will enter into an advance hire agreement contract at one of three levels- high, medium or low which correspond to the requirements of a high medium or low level of orders obtained
3)The level of orders obtained would not be known when the advance hire agreement contract is entered into. A set of probabilities have been estimated by management as to the likelihood of the orders being at a high, medium or low level.
4) Where the advance hire agreement contract is lower than that req’d for the level of orders actually obtained, a premium rate must be paid to obtain the additional P&M req’d
5) No refund is available where the advance hire contract is in excess of that req’d to satisfy the orders actually obtained

Level of Orders Turnover Probability Plant and Machinery hire cost
Advance Hire Conversion Premium
$’000 $’000 $’000
High 15,000 0.25 2,300
Medium 8,500 0.45 1,500
Low 4,000 0.30 1,000

Low to Medium 850
Medium to Low 1,300
Low to High 2,150

Variable Cost (as a % of turnover) 70%

Required:
Prepare a summary which shows the forecast net margin earned by the company for each possible outcome

I need help with this question. Im not sure what approach to take, especially about the “low to medium” etc cost. Can u help me?

If the answer is too much to type here, you can scan the answer and sent it to my email at shanicetrotman03@gmail.com