Question

Chinese Sourcing and the Yuan. 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 3.5 % over a​ one-year period, from $ 886,000 to $ 854,990. The company is now worried that all of the hydraulic tubing that goes into the systems​ (making up 19 % 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 12.3 % revaluation of the yuan against the dollar impact total system​ costs?

Answer 1

New total cost = old total cost+old total cost*hydraulic tubing% cost*(revaluation of yuan)

=854990+854990*0.19*(0.123)=874971.116