Richland Crane (A). Richland Crane (U.S.) exports heavy crane equipment to several Chinese dock facilities. Sales are currently 10,000 units per year at the yuan equivalent of USD24,000 each. The Chinese yuan (CNY) has been trading at CNY8.20=USD1.00, but a Hong Kong advisory service predicts the yuan will drop in value next week to CNY9.00=USD1.00, 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. If Richland Crane maintains the same yuan price and same unit volume, what will be the firm's gross profits?

b. 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?

c. Which do you recommend?

____ is better because it yields higher profits.