Evigi 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 $150 per 100 semiconductors. Dan Robbin is the controller of the PC Division, and Jamie Palders is the controller of the Semiconductor Division.
The following conversation took place between Dan and Jamie:
Dan: I hear you are having problems selling semiconductors out of your division. Maybe I can help.
Jamie: You’ve got that right. We’re producing and selling at about 80% 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.
Dan: What kind of price could you give me?
Jamie: 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, $150 for 100 semiconductors.
Dan: I’m not so sure we can swing that. I was expecting a price break from a “sister” division.
Jamie: 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.
Dan: Fair or not, I think we’ll pass. Sorry we couldn’t have helped. Was Dan behaving ethically by trying to force the Semiconductor Division into a price break? Comment on Jamie’s reactions.