13. Chinese Sourcing and the Yuan. Harrison Equip- ment of Denver, Colorado, purchases all of its. hydraulic tubing from manufacturers in mainland China. In June 2005 the company completed a corporate-wide initiative in six sigma/lean manufac- turing. Completed oil field hydraulic system costs were reduced 4% over a one year period, from $880,000 to $844,800. The company is now worried that all of the hydraulic tubing that goes into these systems (making up 20% of their total costs) will be hit by the potential revaluation of the Chinese yuan-if some in Washington get their way. How would a 12% revaluation of the yuan against the dol- lar impact total system costs? A 12% revaluation of the yuan would be calculated as follows:

Transcribed Image Text:

Yuan 8.28/$ 1+% change Yuan 8.28/$ 1.012 Yuan 7.39/$.