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Case Study - Forest Hill - Chapter 5 ABC

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Accounting 3411 Case Study #1:
Forest Hill Paper Company
By Thomas L. Albright
Forest Hill Paper Company (FHPC) is a closely-held paperboard manufacturer that has been struggling with a number of strategic issues facing a capital-intensive, mature industry. Their product costing system was inadequate to provide management with relevant information for decision making. Therefore, the board of directors has approved your consulting company’s proposal to conduct a cost system pilot study. Besides showing an analysis of FHPC’s product cost, your report to the board of directors is to include strategic recommendations based on your findings.
INSTRUCTOR NOTE: I recommend viewing the following video before reading the rest of the case …show more content…

After debarking, chippers reduce the logs into one-inch cubes.
The second step in the process is termed "digesting". Wood chips are cooked at 325 degrees Fahrenheit to break down the glue-like material bonding the wood fibers. Chemicals used in the digester are reclaimed and used in future pulp production. Following the digesting process, only brown fibers remain which are washed and screened.
A bleaching process is used to convert brown pulp into white pulp.
The paperboard manufacturing process begins by mixing pulp with water and chemicals in the first stage, or headbox, of a paper machine. The mixture is applied to a porous wire mesh; and formation of paper actually occurs within this step. The wire mesh travels through a press that forces the pulp mixture against the wire to eliminate water within the mixture and to form the desired paper thickness. The material then proceeds to a drying section where it travels across numerous cylindrical dryers that are heated with steam. In the final section of the paper machine, long sections of paperboard are rolled up into parent rolls and are removed from the machine. The parent roll is further processed by FHPC 's customers to make various types of paperboard containers.
Sometimes customers require additional processes to be performed on parent rolls. For example, food

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