Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 10

Ethics and professional conduct in business
Rambotix Company has two divisions, the Semiconductor Division and the X-ray Divison. The X ray 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. 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, divisions, 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.
Was Dave behaving ethically by trying to force the Semiconductor Division into a price break Comment on Howard's reactions.