a)CP 8-1 Ethics and Professional Conduct in Business "C.S. Technology Company"

Be sure to discuss both Frank and Lisa's perspective. (5 marks)

b)CP 8-3 Evaluating Divisional Performance "Tasty Goodness Foods"

Please ensure you show your work for all calculations. Question #1: 5 marks

Question #2: 2 marks

Question #3: 3 marks (Hint: consider profit margin and investment turnover in your response)

CP 8-1Ethicsand professional conduct in business

C.S.Technology Company has two divisions, the Semiconductor Division and the PC Divi sion. The PC Division may purchase semiconductors from the Semiconductor Division or from outside suppliers. The Semiconductor Division sells semiconductor products boch internally and externally. The market price for semicooducco.rs is SlOO per 100 semicon ductors. l'rank Hoffman is the controUer of the PC Division, and Lisa Henderson Is the controller of the Semiconductor Division. The following conversation took place between Frankand Lisa:

Fronk:I hear youarehaving problemsselllng semiconductorsoutofyour division. Maybe Ican help.

Liso:You've gotthat rtght.We're producing andsellingat about 90% of oor capacity to ouulders.Last yearwewere selling 100% of capacity.Would It be p0$Siblefor your division to pick upsome ofourexcesscapacity? After a ll, we are partof the samecompany.

Fronlc:What kind of price could you give me?

l.iso:Well, YoU knowaswenas Ithat weareunderstrict profit responsibilityInour divisions, so I would e,cpectto get market price,S100forlOOsemiconductors.

Fmnk:f'm not so surewecanswing that.Iwasexpecting a price break froma"sister'division.

Lisa: Hey,1am only take thls'sister'stuffsofar, Jflgive you a price break. our profits will fallfrom last year'slevel$. I don'tthink Icould explain that. I'm sorry, but Imust remainfirm-marlcet price. After all, It's onlyfair-that'swhat you would have to pay froman externalsupplier.

Fronk: Fairor not,I think we'll pass.Sorrywecouldn't have helped.

Was Frank behaving ethically by trying to force the Semiconductor Division into a price break? Comment on Lisa's reactions.

CP 8-3Evaluating divisional performance

The three divisions of Tasty Goodness Foods arc Snack Goods, Cereal, and Fro;,;en Foods. The divisions are structured as investment centers. The following responsibility repons werepreparedfor thethreedivisionstortheprior year:

SnackGoodsCeN!ill

Frozen Foods

Revenues$1,800,000$2,100,000$1,650,000

Operating expenses1,039,500872,000668,000

Incomefromoperations before

servicedepartment charges$760,500$1,228.000s 982.000

Servicedepartment charges:

Promotions 250,000s 500,000s 390,000

legal114,500203,000196,000

s 364,500$ 703,000$586,000

Incomefromoperationss 396,000$525,000s 396,000

Invested assets$1,800,000 Sl,750,000$1,500,000

1.Which division is making the best use of invested assets and thus shouldbegiven priorityfor future capitalinvestments?

2.Assuming that the minimum acceptable rate of return on new projects is 15%, would all investments that produce a retum in excess of 15% be accepted by the divisions?

3......Can you identify opportunities forimproving the company's financial performance?