Premium Essay

Forest Hills Paper Company

In: Business and Management

Submitted By chronowing
Words 639
Pages 3
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 complexities that drive overhead costs are as follows: production process (debarking, dissenting, and washing of the pulp), material costs of thicker products, and the increase of overhead costs due to product changes.
6. 105% of the material cost Product Grade Average Material Total Cost Reels per Cost per Batch Reel A 50 4800 240000 B 2 5200 10400 C 35 5600 196000 D 175 7400 1295000…...

Similar Documents

Premium Essay

Forest Hill Paper Company

...Date: February 11, 2013 Subject: Forest Hill Paper Company From the case, we can figure out the Forest Hill Paper Company is a small, closely hold paperboard manufacturer that produces a board line of paperboard in large reels. 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. FHPC produced 20 kinds of paperboard and follow the lean manufacturing principle, and maintains minimal inventories. Market demand and the theoretically optimal production schedule are the factors to make production schedules. The strategy used by Forest Hill Paper Company to compete is to use a differentiation strategy. They have been offering a full range of both products and services, trying to create a niche based on service and rapid response to customer needs. I think the most important challenge for Forest Hill Paper Company is cost allocation, there is a gap between allocated cost and actual cost, and the methods company used was not correct. There are four overhead costs drivers for Forest Hill Paper Company: Large variability of output, the demand is bigger than the production capacity during a boom and decreases during down times; FHPC produces a huge variety of product that increase costs due to the processing required; Several steps with the machine causing costs to increase; Some costs are......

Words: 335 - Pages: 2

Free Essay

Forest Hill Paper Company

...Self-managed work team - a type of work team that operates without a manager and is responsible for a complete work process or segment. Forming stage-people join the group and group defines purpose, structure, and leadership. Storming –intragroup conflict, who will control the group and what needs to be doing. Norming-close relationship develops and the group becomes cohesive. Human/R-conflict is a natural and inevitable outcome in any group and need not be negative, but has potential to be positive force. Char. Of effective teams, mutual trust, unified commitment, good communication, negotiating skills, appropriate leadership and internal and external support. Organizational citizenship behavior(ocb)-is discretionary behavior that’s not part of an employee’s formal job requirement, but which promotes the effective functioning of the organization. Cog.component of an attitude –the beliefs, opinions, knowledge held by a person. Aff. Component-the emotional or feeling part of an attitude. Behavioral comp-refers to an intention to behave in a certain way toward someone or something. Cognitive dissonance is any incompatibility or inconsistency between attitudes or between behavior and attitudes. Resilience-an individual’s ability to overcome challenges and turn them into opportunities. Overcoming com. Barriers-use feedbacks, simplify language, listen actively, constrain emotions, and watch nonverbal cues. Maslow’s-physiological needs-food, drink, shelter, sex, and other physical......

Words: 907 - Pages: 4

Premium Essay

Forest Hill

...Forest Hill Case 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 both products and services, trying to create a niche based on service and rapid response to customer needs. 4. What are some examples of complexity that drive overhead costs for Forest Hill? Examples of complexity that are driving overhead costs are: * Large variability of output; the demand is greater than the production capacity during a boom and decreases during down times * FHPC produces a huge variety of products that increase costs due to the processing required * Several steps with the machine causing costs to increase * Some costs are related to direct materials, while others depend on the batches 5. How does the current system capture manufacturing costs and assign them to......

Words: 340 - Pages: 2

Premium Essay

Forst Hill Paper Company Case

...Q7-1) The YTM is the interest rate the market requires for a bond. The coupon rate is the annual coupon divided by the face value of the bond. The coupon rate will remain the same. If the bond is issued with a 8% coupon rate but the YTM is 10% the bond will still have an 8% coupon rate it would just be sold at a discount because the price of the $1,000 bond has now decreased to match the 10% YTM. Q7-4) Original Bond: Present Value: $1,000/1.09(9)=$460.43 Annuity Present Value: $90 x (1-1/1.09(9))/.09 =$90 x (1-1/2.171893279)/.09 =$90x5.995246893 =$539.57 =$460.43 + $539.57 = $1,000 Bond currently sells for $934 so we will try using a 10% YTM. $1,000/1.10(9) = $424.10 = $90 x (1-1/1.10(9)/.10 =$90 x (1-1/2.357947691)/.10 =$90 x 5.759023816 =$518.31 = $424.10 + $518.31 = $942.41 – so it is not 10% Trying 11% $1,000/1.11(9) = $390.92 =$90 x (1-1/1.11(9)/.11 =$90 x (1-1/2.558036924)/.11 =$90 x 5.537047532 =$498.33 =$390.92 + $498.33 =$889.25 so it is not 11%. Trying 10.5% $1,000/1.105(9) = $407.14 =$90 x (1-1/1.105(9)/.105 =$90 x 5.646323879 =$508.17 =$407.14 + $508.17 =$915.31 Trying 10.25% $1,000/1.1025(9) = $415.52 =$90 x (1-1/1.1025(9)/.1025 =$90 x 5.702237514 =$513.20 =415.52 + $513.20 = $928.72 Trying 10.2% $1,000/1.102(9) = $417.22 =$90 x (1-1/1.102(9)/.102 =$90 X 5.713524415 =$514.22 =$417.22 +......

Words: 456 - Pages: 2

Premium Essay

Forest Hill Case Analyse

...Introduction The Forest Hill Paper Company (FHPC) is a small, closely held paperboard manufacturer that produces “parent rolls” which are then distributed to converters for further processing. Due to their small size in comparison to many of their competitors in the industry, FHPC would be classified as a niche company as stated in the case. Part of FHPCs strategy, which will be looked at further below, is to create a niche based on service and rapid customer response that the larger manufacturing companies are too large to be able to do successfully. Competitive Environment The environment in which Forest Hill Paper Company operates in is a cyclical environment with upswings every three to four years. Due to the cyclical nature of the industry, customers try to anticipate times when they would not be able to get paper by ordering large quantities of paper at certain times and none at others. Because of this, FHPC has times when they are flushed with orders and cannot meet them with their production capabilities, and times when they are not running at optimal levels due to lack of demand. Along with this issue, the market share for domestic paperboard has been steadily declining. The most significant reason there is a decline in market share is the moving trend toward plastic and more environmentally friendly forms of paperboard. In general throughout the industry, companies have made little effort to expand capacities of the production facilities. At times the......

Words: 279 - Pages: 2

Premium Essay

Forest Hill Paper Company Cost Analysis

...Case Analysis of Forest Hill Paper Company Background Forest Hill Paper Company (FHPC) is a small company manufacturing a line of paperboard products in answer to a cyclical economic environment. FHPC is trying to provide greater customer service and satisfaction by providing a full product line. Paperboard products are sold in large reels/rolls which are offered with 20 different grades of thickness, with an option for surface smoothing coating and one for the option of having slits/cuts. Managers know that in a cyclical economy supply and demand can be at polar ends. During high demand times finding suitable substitutes is an issue as it can cause customer dissatisfaction. As they are in a high demand economic time currently they are looking for ways to be more cost management effective before the downturn occurs. We will analyze FHPC issues to determine which costing system would serve to improve both profitability and provide a strategy for a cyclical economy. 1. How would you classify FHPC in terms of size and ownership? As the article states, FHPC is a small, privately owned and seems to held tightly by family members. 2. What is the nature of the industry in which FHPC competes? The paperboard industry is one which has to operate under fluctuating conditions that has wide economic swings every three to four years. As well as being a fluctuating one it is also highly competitive. In recent years FHPC has experienced some loss......

Words: 896 - Pages: 4

Premium Essay

Forest Paper Hill Memo

...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......

Words: 489 - Pages: 2

Premium Essay

Forest Hill Memo

...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......

Words: 381 - Pages: 2

Premium Essay

Forest Hill Paper Company

...The current 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......

Words: 1167 - Pages: 5

Free Essay

Forest Hill Paper Company

...History Of Forest Hill Community Prepared by George Cottle, Sr. Location Forest Hill Community is situated on the waters of Bradshaw and Spruce Run. Starting at A. L. Campbell's, on Greenbrier River, three miles from Forest Hill and running to J. T. Campbell's, on a line from there including P. M. Garrison's; thence South West to and including W. L. Redmond's; thence North to and including C. G. Ramsey's; and thence Northeast by J. S. Canterberry's and including him to the starting point; it includes twenty-five square miles. It is inhabited by sixty-six families with a population of four hundred. Points of Interest One of the natural wonders of this community is situated on the farm of P. M. Foster, and is known as the "Seven Wonders". This is an immense rock in the shape of an inverted pyramid. It is about thirty feet tall, four by six feet at the base, and about twenty by thirty feet at the top. Tradition tells how it received its name. It is said that a man upon viewing this Wonder, wondered six times how it stood up and one time if it was supported by an oak which grew by the side of the rock. He said, "You are surely a "Seven Wonders". This rock is covered with names and dates. Some of them are more than a hundred years old. Another natural wonder of Forest Hill Community, is known as the "Devil's Den". This is situated on the line between J. H. Rogers and J. T. Canterberry's, and consists of a huge wash basin, writing desk, and a seat. This wonder is of sand......

Words: 6883 - Pages: 28

Free Essay

1-Forest Hill纸业公司

...Forest Hill 纸业公司 Thomas L. Albright University of Alabama 简介 Forest Hill 纸业公司(Forest Hill Paper Company, FHPC)是一 家小型、由少数股东拥有的纸版 厂,制造多种大卷(称 1 FHPC 生产 20 种不同纸质的纸版。有些等级大量生 产,每一批需要连续生产好几天;有的等级少量生产,每 一批只需要几个小时。按照‚精益生产原则(lean manufacturing principle)‛,企业的存货维持在最低水平。 生产的计划安排取决于两个因素:市场的需求和理论上的 最佳生产进度。确定最佳生产进度的做法,是要减少不同 规格的产品在转换生产时因两批纸版的基本重量相差过多 而造成的浪费 2。 为‚大卷筒‛)纸版。这些大卷筒在出售给纸盒加工商 后,将作进一步加工,最终可制成各种各样的消费产品, 例如做成可以在微波炉中加热的食品包装盒。长久以来, FHPC 的所有者们追求一种战略:生产可供各种各样用途 的纸版产品。这是一家在商品市场上与许多大公司相竞争 的小型企业,它的管理层深信,要想在竞争中成功就必须 能够提供多种多样的产品和服务。因此,企业的战略就定 位于:在服务和对客户需求迅速反应的基础上,创造出具 有自己特色的一席之地。 对于外人来说,来到这家纸版厂漫不经心地粗粗一 看,虽然不见得能够看出这家企业有产品多样化的特点, 但还是能够看到它与其他企业之间,存在着细微的差别。 例如,同样长度的不同的纸版,在重量上(因用卡规测量 出的厚度不同而异)是各不相同的。另外,有的纸版是没 有涂层的,有的则涂上一层不透明的、白色胶基材料,这 层涂料能够掩盖纸版表面的瑕疵,并使表面平滑划一。客 户们越来越关心纸版表面的平整,因为纸版表面绝对平 滑,对于纸版最后做成的容器或在纸板盒上印刷复杂的图 案而言,至关重要。 竞争环境 纸张和纸版的生产者在周期性的经济环境中经营,每三或 四年会有一次攀升。在经济繁荣的时候,供应有限,客户 们要求供应的,往往为往常订货量的两或三倍。然后,在 经济再一次进入发展缓慢期间,客户们却开始收到以前下 达的定单的巨额货物。结果是,有许多客户会发现他们的 纸张存货超过了当前需要量,暂时停止订货。这是令纸版 生产者‚头痛‛的事;更有甚者,国内纸版的市场份额已 1 2 paper board,亦可译为‚纸卡‛,本文一律译为‚纸版‛。—译者 纸版的规格不同,表现在基本重量上;前后两批产品的规格相近, 就能尽量减少两批产品因规格不同所需要花费的设备调整准备时 间。—译者 IM A EDUCATIONAL CASE JOURNAL .. 1.. VOL. 1, NO. 2, ART. 4, JUNE 2008 处在衰落状态。纸版市场份额下降的主要原因,是采用塑 料产品和比较环保的再生型纸版的趋势使然。 在整个行业中,各公司在扩大生产能力上所作的投资 都为数有限。当各种纸品的需求量激增时,需求就会超过 生产能力。在繁荣时期,这个行业就会经历价格急剧攀 升,大部分等级的产品的销售价格将达到最高纪录。 器成本与造纸机的成本并在一起,向产品进行分配。因 此,不同等级的纸版产品都分摊了分割的成本,虽然多数 等级的产品并没有经过分割这道工序。工程研究提醒我 们,切割工序的成本,可能比我们原先所想的要高。这道 工序除了需要有专门的设备和额外的劳力之外,切割用的......

Words: 755 - Pages: 4

Free Essay

Forrest Hill Paper Company Potential Calculations

...Forest Hill Paper Company Table 1 Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest Hill, Forest......

Words: 297 - Pages: 2

Premium Essay

Forest Hill

...Forest Hill can be classified as a “small paperboard manufacturer that produces a broad line of paperboard in large reels.” 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.) 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. Forest Hill can be classified as a “small paperboard manufacturer that produces a broad line of paperboard in large reels.” 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.) Forest Hill competes in an industry that is being stagnated by the rise in......

Words: 291 - Pages: 2

Premium Essay

Case Study - Forest Hill - Chapter 5 Abc - Fall 2014(1)

...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......

Words: 2304 - Pages: 10

Premium Essay

Forest Hill

...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...

Words: 487 - Pages: 2