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.