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 18,000 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 years - answer the following questions.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Solutions.XISX (37.4 KB)
AY
X Love Island -...
Problem 1.3 Peng Plasma Pricing
canvas.liverpool.ac.uk
Year
2007
2008
2009
2010
2011
2012
2013
2014
Cumulative
Cost
(Rmb)
16,000
15,400
14,800
14,700
14,200
14,400
14,600
14,800
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 18,000 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 years - answer the following questions.
Cost
ACFI260 Fin...
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?
Fixed Rmb Pricing of the PT350 Plasma Cutting Torch
Margin
(Rmb)
2,000
2,600
3,200
3,300
3,800
3,600
3,400
3,200
Margin
Price
(Rmb)
Fixed Rmb Pricing of the PT350 Plasma Cutting Torch
18,000
18,000
18,000
18,000
18,000
18,000
18,000
18,000
Seminar1Pro...
Price
anaiscde - T...
Margin Average Rate
(percent) (Rmb/US$)
11.1%
14.4%
17.8%
18.3%
21.1%
20.0%
18.9%
17.8%
7.61
6.95
6.83
6.77
6.46
b Login | bart....
6.31
6.15
6.16
Margin Average Rate
↓
Price Percent Chg
(US$) in US$ Price
2,365
2,590
2,635
2,659
2,786
2,853
2,927
2,922
9.50%
1.76%
0.89%
4.80%
2.38%
2.60%
-0.16%
23.54%
Price Percent Chg
+0
b Login | bart!...
Transcribed Image Text:N Home - Netflix Solutions.XISX (37.4 KB) AY X Love Island -... Problem 1.3 Peng Plasma Pricing canvas.liverpool.ac.uk Year 2007 2008 2009 2010 2011 2012 2013 2014 Cumulative Cost (Rmb) 16,000 15,400 14,800 14,700 14,200 14,400 14,600 14,800 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 18,000 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 years - answer the following questions. Cost ACFI260 Fin... 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? Fixed Rmb Pricing of the PT350 Plasma Cutting Torch Margin (Rmb) 2,000 2,600 3,200 3,300 3,800 3,600 3,400 3,200 Margin Price (Rmb) Fixed Rmb Pricing of the PT350 Plasma Cutting Torch 18,000 18,000 18,000 18,000 18,000 18,000 18,000 18,000 Seminar1Pro... Price anaiscde - T... Margin Average Rate (percent) (Rmb/US$) 11.1% 14.4% 17.8% 18.3% 21.1% 20.0% 18.9% 17.8% 7.61 6.95 6.83 6.77 6.46 b Login | bart.... 6.31 6.15 6.16 Margin Average Rate ↓ Price Percent Chg (US$) in US$ Price 2,365 2,590 2,635 2,659 2,786 2,853 2,927 2,922 9.50% 1.76% 0.89% 4.80% 2.38% 2.60% -0.16% 23.54% Price Percent Chg +0 b Login | bart!...
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