C.S. Technology Company has two divisions, the Semiconductor Division and the PC Division. The PC Division may purchase semiconductors from the Semiconductor Division or from outside suppliers. The Semiconductor Division sells semiconductor products both internally and externally. The market price for semiconductors is $100 per 100 semiconductors. Frank Hoffman is the controller of the PC Division, and Lisa Henderson is the controller of the Semiconductor Division. The following conversation took place between Frank and Lisa: Frank: I hear you are having problems selling semiconductors out of your division. Maybe I can help. Lisa: You've got that right. We're producing and selling at about 90% of our capacity to outsiders. Last year we were selling 100% of capacity. Would it be possible for your division to pick up some of our excess capacity? After all, we are part of the same company. Frank: What kind of price could you give me? Lisa: Well, you know as well as I that we are under strict profit responsibility in our divisions, so I would expect to get market price, $100 for 100 semiconductors. Frank: I'm not so sure we can swing that. I was expecting a price break from a "sister" division. Lisa: Hey, I can only take this "sister" stuff so far. If I give you a price break, our profits will fall from last year's levels. I don't think I could explain that. I'm sorry, but I must remain firm---market price. After all, it's only fair --that's what you would have to pay from an external supplier. Frank: Fair or not, I think we'll pass. Sorry we couldn't have helped. Was Frank behaving ethically by trying to force the Semiconductor Division into a price break? Comment on Lisa's reactions.
C.S. Technology Company has two divisions, the Semiconductor
Division and the PC Division. The PC Division may purchase semiconductors
from the Semiconductor Division or from outside suppliers. The
Semiconductor Division sells semiconductor products both internally and
externally. The market price for semiconductors is $100 per 100
semiconductors. Frank Hoffman is the controller of the PC Division, and
Lisa Henderson is the controller of the Semiconductor Division. The
following conversation took place between Frank and Lisa:
Frank: I hear you are having problems selling semiconductors out of your
division. Maybe I can help.
Lisa: You've got that right. We're producing and selling at about
90% of our capacity to outsiders. Last year we were selling 100% of
capacity. Would it be possible for your division to pick up some of our
excess capacity? After all, we are part of the same company.
Frank: What kind of price could you give me?
Lisa: Well, you know as well as I that we are under strict profit
responsibility in our divisions, so I would expect to get market price, $100
for 100 semiconductors.
Frank: I'm not so sure we can swing that. I was expecting a price
break from a "sister" division.
Lisa: Hey, I can only take this "sister" stuff so far. If
I give you a price break, our profits will fall from last year's levels.
I don't think I could explain that. I'm sorry, but I must remain
firm---market price. After all, it's only fair --that's what you would
have to pay from an external supplier.
Frank: Fair or not, I think we'll pass. Sorry we couldn't have
helped.
Was Frank behaving ethically by trying to force
the Semiconductor Division into a price break? Comment on Lisa's
reactions.
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