Richland Crane A Richland Crane US exports heavy crane equipment to several Chinese dock facilities. Sales are currently units per year at the yuan equivalent of USD each.
The Chinese yuan CNY has been trading at CNY USD but a Hong Kong advisory service predicts the yuan will drop in value next week to CNY USD 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?
a If Richland Crane maintains the same yuan price and same unit volume, what will be the firm's gross profits?
USD Round to the nearest dollar.
