Discussion:
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 4% over a one-year period, from $880,000 to $844,800. The company is now worried that all of the hydraulic tubing that goes into the systems (making up 20% 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% revaluation of the yuan against the dollar impact total system costs?