Forest Hill Case Essay examples

758 Words Mar 6th, 2012 4 Pages
1. How would you classify Forest Hill Paper Company in terms of size and ownership?

Forest Hill Paper Company is a small, closely hold paperboard manufacturer that produces a board line of paperboard in large reels.

2. What is the nature of the industry in which Forest Hill competes?

FHPC competes in a cyclical economic environment, with upswings every three to four years. The current market is mature and declining with a recent trend towards plastic and a more environmentally friendly grade of recycled paperboard.

3. Identify and discuss the strategy used by Forest Hill to compete in a commodity market.

The strategy used by Forest Hill to compete is to use a differentiation strategy. They have been offering a full range of
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What is the cost for Forest Hill to conduct a grade change?

Total grade costs / number of changes
=$47,000 / 4 = $11,750

8. What is the cost for Forest Hill to slit a reel of paperboard? As shown in Exhibit 1, only products A and C are routinely slit. For purposes of your analysis, assume the slitting equipment must be set up and adjusted between each reel slit.

Total slitting costs / Total number of reels with required slitting costs
$195,000 / (50 (A) + 35(C) ) = $2,294.12 per reel
9. Calculate the new volume-based overhead rate after removing grade change and slitting costs.

Net cost provided $1,586,470 / material costs $1,741,400 = 91.1%
10. Determine the activity-based costs for grades A-D

Product | Material Cost | Overhead | # Reels | Grade Change per Reel | Slitting costs per Reel | Total Cost | A | 4800 | 4372.8 | 50 | 235.00 | 2294.12 | 11,701.92 | B | 5200 | 4737.2 | 2 | 5,875.00 | 0 | 15,812.20 | C | 5600 | 5101.6 | 35 | 335.71 | 2294.12 | 13,331.43 | D | 7400 | 6741.4 | 175 | 67.14 | 0 | 14,208.54 |

11. Prepare a table that illustrates the percentage change in costs between the volume-based system and the strategic activity-based system.

Product | Total ABC Cost | Traditional Volume Costing | Total Increase | A | 11,701.92 | 9840 | 18.92% | B | 15,812.20 | 10660 | 48.33% | C | 13,331.43 | 11480 | 16.13% | D | 14,208.54 | 15170 | -6.34% |

12. What

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