Richland Crane$($A$).$Richland Crane$($U$.$S$.)$ 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 $$USD$1\mathrm{.}00,$ but a Hong Kong advisory service predicts the yuan will drop in value next week to CNY$,$ after which it will remain unchanged for at least a decade. Accepting this forecast as$$ given, Richland Crane faces a pricing decision in the face of the impending devaluation. It may either$(1)$ 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?

Question content area bottom

Part $1$

a$.$ If Richland Crane maintains the same yuan price and same unit$$ volume, what will be the$$ firm's gross$$ profits?

USD

$$

enter your response here$($Round to the nearest$$ dollar.$)$

Part $2$

If Richland Crane maintains the same dollar$$ price, raises the yuan price in China to offset the$$ devaluation, and experiences a$10\%$ drop in unit$$ volume, what will be the$$ firm's gross$$ profits?

USD

$$

enter your response here$($Round to the nearest$$ dollar.$)$

Part $3$

b$.$ Which do you$$ recommend?$($Select from the$$ drop$-$down menu.$)$

$$

Case $2$

Case $1$

is better because it yields higher profits.