...September 23, 2013 Subject: Forest Hill Analysis Forest Hill Paper Company is currently using a cost system that has proven its lack in accuracy. Their product line ranges in a number of ways from width and thickness to coating. The biggest problem facing Forest Hill and their costing system is the allocation of indirect material costs to each type of paper that they produce. Forest Hill produces 20 different types of paper with production cycles ranging from a few hours to several days. Their costing system needs to be re-evaluated in order to match specific costs with specific types of paper. Forest Hill combines labor and machine costs for all of the different varieties of paper, which includes the costs of slitting the paper; most types of paper are not slit. There are numerous errors with their current costing system that can be discovered in full after our in depth analysis of their production cycle and allocation process. I believe that our team of analysts needs to take a further look into how Forest Hill is actually allocating their manufacturing costs. We will first need to get specific details about the production process of each of the 20 types of paper that they currently produce. Some of the details we will need to acquire include width, thickness, length, whether its split or not, and also the coating. They are currently allocating these costs across the entire product line, which doesn’t account for the paper types that are more expensive than...
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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 study. In the following paragraphs, there is company specific terminology that may make the case seem more difficult than it is if you don’t have some background information (and a visual of what is being described) for this type of company. The following video is not of Forest Hill Paper Company; however, it describes and shows the production environment of a similar company, Clearwater Paper Corporation: http://youtu.be/3t4jSVXjutI Background: Product and Process Description Forest Hill Paper Company (FHPC) produces an extensive line of paperboard in large reels, termed parent rolls. These parent rolls are sold to converters who further process them into containers used for a diverse line of consumer products. The owners of FHPC have long pursued the...
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...How would you classify Forest Hill Paper Company in terms of size and ownership? What is the nature of the industry in which Forest Hill competes? A cyclical economic environment Identify and discuss the strategy used by Forest Hill to compete in a commodity market. Forest Hill’s strategy is to create a niche based on service and rapid response to customer needs. What are some examples of complexity that drive overhead costs for Forest Hill? Paperboard differs by basis weight for a specified length of product. Additionally, paperboard may be uncoated or coated with an opaque, white clay-based material that masks cosmetic flaws and smooths surface variability How does the current system capture manufacturing costs and assign them to products? (Prove the overhead rate is 105% of material cost.) Product costs at Forest Hill were calculated by multiplying the overhead rate by material costs. Calculate the volume-based (traditional) cost per reel for grades A-D identified in Exhibit 1. MOH DM Total per reel A=4800*1.05=5040 4800 9840 B=5200*1.05=5460 5200 10660 C=5600*1.05=5880 5600 11480 D=7400*1.05=7770 7400 15170 What is the cost for Forest Hill to conduct a grade change? 47000/(50+2+35+175)=$150.64 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...
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...2013 SUBJECT: Forest Hill Cost Systems Forest Hill is a small company that manufactures paperboard in large reels. Since FHPC is a small company, they are forced to offer an array of products to remain competitive in today’s markets. They can produce 20 different grades of paperboard in both bulk and small-customized orders. In the past, FHPC has recorded many of their costs as conveniently as possible, which has resulted in incorrect allocation of costs. Our team has been hired by Forest Hill because they would like to have a better understanding of their own cost structure especially with the unstable market for their products. Key Issues As stated above, FHPC produces 20 different grades of paperboard at any volume requested. This is potentially costing the company far too much money than necessary. For instance, one-half is lost to scrap every single time a grade change is made. Some of the scrap can be recycled but other times it is simply thrown out. If FHPC continuous to make all twenty grades in one month, they are producing far more scrap paper than necessary. Additionally, certain paper cuts cause a substantial amount of depreciation on the knives used in the slitting process resulting in the purchase of more knives than potentially necessary. These certain grades require much more labor time than other grades because the knives causing more need for inspection often damage the paperboard edges. If FHPC continuous to manufacture 20 different paper grades in...
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...1. Forest Hill Paper Company Ladarrius Cook Lawrence Comardelle Sydney Stover 2. Classification of Forest Hill According to a recent IBIS World Report, U.S. revenue for businesses in the paper manufacturing industry is $49 billion. As of August 2013, average growth within this sector is -2.7%, employment is 67,325, and total number of businesses equal 152. On average, that equals 442 employees per firm, and $322 million dollars per firm (+/-). According to the case and information obtained on the U.S. industry size, Forest Hill can be classified as a “small paperboard manufacturer that produces a broad line of paperboard in large reels.” 3. Nature of the Industry Forest Hill competes in an industry that is being stagnated by the rise in electronic communications (e.g. email) and imports. According to the case, Forest Hill operates in a cyclical environment due to customer buying habits. An advantage for Forest Hill is that there are high barriers to entry within this market due to equipment costs and governmental regulation. 4. Forest Hill Strategy According to the case, “ as a small company competing against a commodity market, management believes Forest Hill must offer a full range of both products and services. Thus, Forest Hill’s strategy is to create a niche based on service and rapid response to customer needs. (Not much innovation in the product, but top tier service, which can be quantified by value estimators.) 5. Complexities Some examples of the...
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...INSTRUCTIONS Forest Hill Paper Company Assigned: Wednesday, February 20, 2013 Due: Dr. O’Connor/Writing Lab by Friday, March 8 The Forest Hill Paper case represents an exercise in activity based costing to help you understand in greater depth how activity based costing is performed within organizations. The case suggests that developing the product cost is not the end point for the accountant – the proper evaluation and analysis of the “calculated” information is integral in making recommendations contributing to organization success. Assume that your group is a consulting group that has been hired by Forest Hill’s management team. Your group has listened to the discussions contained in the case and obtained the information contained in the exhibits. Your recommendations should be contained in a business memorandum addressed to Forest Hill’s management team. The memo should be no longer than three single spaced typed pages, excluding any relevant exhibits you may have prepared and referenced in the text of your memo. The exhibits may be attached at the end of your memo. The memo should, at a minimum, respond to the questions contained at the end of the case. This assignment will be graded in part on the “correctness” of the calculations and quantitative analysis. However, “getting the numbers right” is only the first step. A significant portion of the points will be earned by the appropriateness of your recommendations, your ability to identify...
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... Introduction 2 Key Decision Criteria 3 Alternatives analysis 4 Recommendations Action and Implementation Plan Conclusion Appendix References Problem Faced Rajeev Singh wants to decide whether he should invest more financial resources into his suffering business. He sees alternatives that could potentially turn the business around but is unsure at ultimately what he should do. Competition is becoming fierce in the furniture industry since there are few barriers to enter the market. Consumers will also shop around for the lowest price, since the price is more important than the brand recognition. When deciding what we thought Rajeev should do, we have determined alternatives that we feel would be the most successful for the business. To determine each alternative, we came up with charts comparing each criteria for the major factors that we decided were most important for the success of Rajeev. By using the SWOT analysis we found the strengths to focus on and the weaknesses to be aware of. We then compiled charts to score each option. Introduction The furniture industry has been and continues to be very important industry in probably almost all countries in the world, which have or don't have large forest resources. Like other industries, the furniture industry “is rapidly growing while the market is becoming… fiercely competitive” more than ever...
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...The Forest Hill Paper Company is a thriving company, however, there are ways the company can improve its product cost allocation, and, thus, its profitability. After performing a thorough product cost analysis of the company, we, as the hired consultants of the company, have come up with a few recommendations on how to increase its efficiency and enhance the organization’s success. First, as already mentioned, the company is using the simple-costing method for its product allocation, and, therefore, inadvertently misallocates its product costs for specific grades. Instead of spreading the costs uniformly to all grades using the material costs as a cost driver, the company should use the activity-based costing system to allocate its product costs. That way, the cost of each of the grades will be allocated based on how much activity (grade changes, slitting) it actually used. Moreover, the company will be able to assess the profitability of each of its grades more accurately. Second, as seen in our product cost analysis, we calculated the profit margins of each of the four grades and determined their profitability. The company is overcosting product D and undercosting products A,B, and C. Moreover, product B has a negative profit margin, therefore, we suggest that the company drops this product. By dropping this product, the company will incur less in grade change costs, which will, consequently, increase its profitability. Also, as product D has the highest profit margin...
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...Comprehensive Environmental Analysis Paper Business ventures require research regarding various factors that can impact the proposed business. Global business ventures require even more analysis. A global business venture, such as this centered on leather and leather goods, requires strong analysis of the proposed host nation for the business. The company must consider social, political, economic, health, and production factors within the host nation. This analysis ensure that the firm considers every aspect of the business so that the venture is successful. Products / Service Descriptions Starting a new venture in Brazil on leather goods, they must start looking to “take advantage of differences in the cost, and quality of production” (Hill, 2009). This organization will specialize in high quality leather material to produce different types of products. Most organizations provide a flat finish on leather materials but this organization will provide different types of leather finishes as they are ready to gratify the consumers whether they like oil based finish or waxed finishes. This organization will solely produce the best finishes on leather materials in order to produce shoes, belts, handbags, luggage, and wallets. Their services will look for ways to adopt a cleaner environmental system to reduce future environmental cost, and introduced a sustainable waste management system for leather goods. The system will detect defective sections in our leather material...
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...parenting & corporate strategy…………………………………..…..8 2.2.1. Definition of a corporate parent……………………………………………………8 2.2.2 ART as a Corporate parent………………………………………………………….9 2.2.3 ART’S approach as a corporate parent…………………….……………………12 3.0 ART’S CORPORATE STRATEGY………………………………………………….……..13 3.1. Restructuring…………………………………………………………………………13 3.2. Investment in resources…………………………………………………….……..13 3.3 Strategic alliances…………………………………………….....……………………13 3.4 Marketing………………………………………………………………………………..14 3.5 Expansion and distribution…………………………………………………..………14 3.6 Value Creation………………………………………………………………………..14 3.7 ART’s BCG portfolio analysis…………………………………….…………………15 3.8 Key...
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...Our project on: Country Specific Advantage in Tourism Industry (Bangladesh Perspective) Submitted To: Koushik Prasad Pathak Lecturer Department of Marketing Date: 21 June, 2011 Jagannath University | Name |Id No | |Md. Mahbubul Hoque |07882824 | |Tanvir Ahmed |091700 | |Utsarika Singha |091764 | |Santana Sharmin |091725 | |Promit Das Gupta |091755 | We are Gallant Beta ...
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...Wang EMAIL xiaozu.wang@faculty.hult.edu INSTRUCTOR AVAILABILITY Please contact by email CLASS TIMES & ROOM(S) MIB1: Jan 7, 9, 11, 15, 17, 21, 23, 25, 1:30-4:50, Feb. 1, 9:00-12:20, Feb. 7, 1:30-4:50 COURSE AIMS AND DESCRIPTION OF CONTENT This is an introductory course of finance for MIB students. The course aims to provide students with a conceptual framework and a set of technical tools for making corporate investment decisions. The focus will be maximizing the value of the firm and capital budgeting. Some ethical issues will be highlighted throughout the course. INTENDED LEARNING OUTCOMES Key (Assessed) Learning Outcomes: On completion of this course, students should understand and be able to do the following: 1. Estimate the cost of capital for corporate investment decisions; 2. Make corporate investment decisions using discounted cash flow method; 3. Manage working capital and corporate long-term growth. Supplemental Learning Outcomes: While not assessed, it is anticipated that students will develop the following: 4. Understand the importance of corporate governance for achieving long-term corporate financial objectives and valuation; 5. Understand some unique features of Chinese capital markets. TEACHING AND LEARNING The course will be a mixture of lectures, case discussions and individual and group practices. Students are expected to do the following. 1. 2. 3. 4. Read the assigned textbook chapters BEFORE the classes. Prepare for cases BEFORE case discussions...
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...acknowledge our heartiest gratefulness to all who have extended their hand of co-operation in preparing the report. At first we express our gratitude and acknowledge our indebtedness to our relevant course instructor for his overall co-operation, guidance, advice and support in discharging our responsibilities consciously and preparing this report. We would like to thank all the group members of our group for the sincere effort to complete this report. Without the teamwork and supportive attitude of the group members it wouldn’t have been possible to prepare this resourceful report. We would be thankful if this report comes to any benefit of our teacher as well as any students of our department. Executive Summary On this term paper we focus on branding the Bangladesh by attracting the tourists. To attract the tourists at first we have analyzed the situation where Bangladesh in spite of having the wonderful places still falls behind....
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...costing strategy implemented in your company is not maximizing your ability to determine profitability of each product due to the incorrect cost allocation. You are currently using the strategy of “peanut butter” costing to assign costs to your current product line. Peanut butter costing is when you take the total costs of your products, in this case overhead, and spread them across your entire product line evenly. When you use this strategy, you can end up over allocating costs to some products and under allocating costs to others. By implementing a more effective costing strategy, you can accurately assign costs to each product based on activity levels and additional costs that are unique to each product. With your current costing system, you are assigning slitting costs to products that aren’t slit, and you are averaging the grade changes equally, which is ineffective in determining the correct prices and costs assigned to each product. After analyzing your books, per unit we found that Product A is currently making a profit of $898, Product B has a loss of $2,300, Product C has a profit of $868, and Product D has a profit of $5,291. As you can see above, there is a remarkable difference between the four products’ profitability once costs are correctly allocated, which causes problems for Forest Hill Paper Company. Some of those problems include pricing, production, warehouse capacity, and profitability. Incorrectly allocating costs to each product affects every aspect...
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...gustafsson@lnu.se Lars-Olof Rask lars-olof.rask@lnu.se School of Engineering Linnaeus University, Växjö, Sweden Abstract Purpose; The purpose of this study is to identify distribution channel research needs given the variety of distribution channel challenges among Swedish sawmill companies. Design / methodology / approach; Explorative case study research Findings: The paper proposes a typology of sawmill distribution channel challenges, as well as aligns research needs with distribution channel type. The typology is based on i) number of sawmill units within the firm, in combination with ii) distribution channel heterogeneity. Significant management decisions and research needs are identified for the different types. Research limitations / implications; This research makes tentative statements regarding typology of sawmill distribution channel challenges and potential research needs in the Swedish sawmill industry with regards to the respective typology. However, further research is needed in order to validate these results. What is original/value of paper: This paper focus on the sawmill industry distribution channels, which is a neglected but important area for sawmill’s competitive advantage. The paper also contributes to research by applying contingency theory and typology as an approach to deal with the variety of sawmills distribution channel challenges. Keywords; Typology, distribution channel challenges, research needs, and Swedish sawmill industry 1. Introduction Softwood...
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