TIF 9-1 Ethics in Action Sembotix Company has several divisions including a Semiconductor Division that sells semiconduC- tors to both internal and external customers. The company's X-ray Division uses semiconductors as a component in its final product and is evaluating whether to purchase them from the Semiconductor Division or from an external supplier. The market price for semiconductors is $100 per 100 semicon- ductors. Dave Bryant is the controller of the X-ray Division, and Howard Hillman is the controller of the Semiconductor Division. The following conversation took place between Dave and Howard: Dave: I hear you are having problems selling semiconductors out of your division. Maybe I can help. Howard: 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. Dave: What kind of price could you give me? Howard: Well, you know as well as I that we are under strict profit responsibility in our divi- sions, so I would expect to get market price, $100 for 100 semiconductors. Dave: I'm not so sure we can swing that. I was expecting a price break from a "sister" division. Howard: 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. Dave: Fair or not, I think we'll pass. Sorry we couldn't have helped.
TIF 9-1 Ethics in Action Sembotix Company has several divisions including a Semiconductor Division that sells semiconduC- tors to both internal and external customers. The company's X-ray Division uses semiconductors as a component in its final product and is evaluating whether to purchase them from the Semiconductor Division or from an external supplier. The market price for semiconductors is $100 per 100 semicon- ductors. Dave Bryant is the controller of the X-ray Division, and Howard Hillman is the controller of the Semiconductor Division. The following conversation took place between Dave and Howard: Dave: I hear you are having problems selling semiconductors out of your division. Maybe I can help. Howard: 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. Dave: What kind of price could you give me? Howard: Well, you know as well as I that we are under strict profit responsibility in our divi- sions, so I would expect to get market price, $100 for 100 semiconductors. Dave: I'm not so sure we can swing that. I was expecting a price break from a "sister" division. Howard: 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. Dave: Fair or not, I think we'll pass. Sorry we couldn't have helped.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 1TIF
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Is Dave behaving unethically by trying to force the Semiconductor Division into a price break? Comment on Howard's reactions.
Transcribed Image Text:TIF 9-1 Ethics in Action
Sembotix Company has several divisions including a Semiconductor Division that sells semiconduc-
tors to both internal and external customers. The company's X-ray Division uses semiconductors as a
component in its final product and is evaluating whether to purchase them from the Semiconductor
Division or from an external supplier. The market price for semiconductors is $100 per 100 semicon-
ductors. Dave Bryant is the controller of the X-ray Division, and Howard Hillman is the controller
of the Semiconductor Division. The following conversation took place between Dave and Howard:
ETHICS
Dave: I hear you are having problems selling semiconductors out of your division. Maybe I
can help.
Howard: 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.
Dave: What kind of price could you give me?
Howard: Well, you know as well as I that we are under strict profit responsibility in our divi-
sions, so I would expect to get market price, $100 for 100 semiconductors.
Dave: I'm not so sure we can swing that. I was expecting a price break from a "sister" division.
Howard: 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.
Dave: Fair or not, I think we'll pass. Sorry we couldn't have helped.
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