Mendes Corporation (United State of America (U.S)) exports heavy crane equipment to several Chinese dock facilities. Sales are currently 10,000 units per year at the yuan equivalent of $24,000 each. The Chinese Yuan (Renminbi) has been trading at Yuan 8.20/$, but a Hong Kong advisory service predicts the Renminbi will decrease in value next weak to Yuan 9.00/$, after which it will remain unchanged for a at least a decade. Accepting this forecast as given, Mendes Export faces a pricing decision in the face of the impending devaluation. It may either i. maintain the same yuan price and in effect sell for fewer dollars, in which case Chinese volume will not change; or ii. maintain the same dollar price, raise the Yuan price in China to offset the devaluation, and experience a 10% drop in unit volume. Direct costs are 75% of the U.S sales price. Required:

(a) Calculate what would be the short run (one year) impact of each pricing strategy.

(b) Advise the best alternative for Mendes Corporation.