Manitowoc Crane (U.S.) exports heavy crane equipment to several Chinese dock facilities. Sales are currently...
90.2K
Verified Solution
Link Copied!
Question
Accounting
Manitowoc Crane (U.S.) exports heavy crane equipment to several Chinese dock facilities. Sales are currently 20,000 units per year at the yuan equivalent of $24,000 each. The Chinese yuan (renminbi) has been trading at Yuan8.10/$, but a Hong Kong advisory service predicts the renminbi will drop in value next week to Yuan9.00/$, after which it will remain unchanged for at least a decade. Accepting this forecast as given, Manitowoc Crane faces a pricing decision in the face of the impending devaluation. It may either (1) maintain the same yuan price and in effect sell for fewer dollars, in which case Chinese volume will not change; or (2) 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.
a. What would be the short-run (one-year) impact of each pricing strategy?
b. Which do you recommend?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
