Peng Plasma Pricing. Peng Plasma is a privately held Chinese business. It specializes in the manufacture of plasma cutting torches. Over the past eight years it has held the Chinese renminbi price of the PT350 cutting torch fixed at Rmb 18,600 per unit. Over that same period it has worked to reduce costs per unit, but has struggled of late due to higher input costs. Over that same period the renminbi has continued to be revalued against the U.S. dollar by the Chinese government. After completing the table assuming the same price in renminbi for all yearsanswer the following questions.

a. What has been the impact of Peng's pricing strategy on the US$ price? How would you expect their U.S. dollar-based customers to have reacted to this?

b. What has been the impact on Peng's margins from this pricing strategy from 2007 to 2011?

Fixed Rmb Pricing of the PT350 Plasma Cutting Torch
	Cost	Margin	Price	Margin	Average Rate	Price	Change US$
Year	(Rmb)	(Rmb)	(Rmb)	(%)	(Rmb/US$)	(US$)	Price (%)
2007	16000	2600	18600	14.0%	7.61	2444
2008	15400				6.95
2009	14800				6.83
2010	14700				6.77
2011	14200				6.46
2012	14400				6.31
2013	14600				6.15
2014	14800				6.16
Cumulative

Complete the table below:

(1.

Round all values as in year 2007. 2. Round the percentage change in price to one decimal place.)

Fixed Rmb Pricing of the PT350 Plasma Cutting Torch
	Cost	Margin	Price	Margin	Average Rate	Price	Change US$
Year	(Rmb)	(Rmb)	(Rmb)	(%)	(Rmb/US$)	(US$)	Price (%)
2007	16,000	2,600	18,600	14.0	7.61	2,444
2008	15,400		18,600		6.95

2009

14,800

18,600

6.83

2010

14,700

18,600

6.77

2011

14,200

18,600

6.46

2012

14,400

18,600

6.31

2013

14,600

18,600

6.15

2014

14,800

18,600

6.16

Cumulative

a. What has been the impact of Peng's pricing strategy on the US$ price?(Select the best choice below.)

A. By maintaining a constant price in Rmb, as the average exchange rate (Rmb/US$) decreased, the price in US$ decreased.

B. By maintaining a constant price in Rmb, as the average exchange rate (Rmb/US$) decreased, the price in US$ increased.

C. By maintaining a constant price in Rmb, as the average exchange rate (Rmb/US$) increased, the price in US$ decreased.

D. By maintaining a constant price in Rmb, as the average exchange rate (Rmb/US$) increased, the price in US$ increased.

How would you expect their U.S. dollar-based customers to have reacted to this?(Select the best choice below.)

A. As the price in US$ decreased, the U.S. dollar-based customers would be tempted to look for cheaper alternatives.

B. As the price in US$ increased, the U.S. dollar-based customers would be tempted to look for cheaper alternatives.

C. As the price in US$ remains constant, the U.S. dollar-based customers would be tempted to look for cheaper alternatives.

D. There is not enough information to answer this question.

b. What has been the impact on Peng's margins from this pricing strategy from 2007 to 2011?(Select the best choice below.)

A. Peng's margins in Rmb increased steadily as the average exchange rate (Rmb/US$) decreased.

B. Peng's margins in Rmb decreased steadily as the average exchange rate (Rmb/US$) increased.

C. Peng's margins in Rmb increased steadily as the average exchange rate (Rmb/US$) increased.

D. Peng's margins in Rmb decreased steadily as the average exchange rate (Rmb/US$) decreased.