Harrison Equipment of Denver, Colorado, purchases all of its hydraulic tubing from manufacturers in mainland China. The company has recently completed a corporate-wide initiative in six sigma/lean manufacturing. Completed oil field hydraulic system costs were reduced 3.7% over a one-year period, from $ 890,000o $ 857,070. The company is now worried that all of the hydraulic tubing that goes into the systems (making up 21% of their total costs) will be hit by the potential revaluation of the Chinese yuanif some in Washington get their way. How would a 12.5% revaluation of the yuan against the dollar impact total system costs?

1. What is the current cost of hydraulic tubing?
2. After a revaluation of the yuan against the dollar, the cost of the hydraulic tubing will be?
3. The cost increase (impact in total system costs) as a result of the revaluation is?