Richland Crane ( U . S . ) exports heavy crane equipment to several Chinese dock facilities.
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Question:
Richland CraneUS exports heavy crane equipment to several Chinese dock facilities. Sales are currently comma units per year at the yuan equivalent of USD comma each. The Chinese yuanCNY has been trading at CNY equalsUSD but a Hong Kong advisory service predicts the yuan will drop in value next week to CNYequalsUSD after which it will remain unchanged for at least a decade. Accepting this forecast as given, Richland Crane faces a pricing decision in the face of the impending devaluation. It may either maintain the same yuan price and in effect sell for fewer dollars, in which case Chinese volume will not change; or maintain the same dollar price, raise the yuan price in China to offset the devaluation, and experience a drop in unit volume. Direct costs are of the US sales price.
a What would be the shortrun oneyear impact of each pricing strategy?
b Which do you recommend?
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