...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 related...
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...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 affects...
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...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 stone...
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...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 requirements...
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...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 due...
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...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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...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 products...
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...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 Hill...
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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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...http://www.termpaperwarehouse.com/essay-on/Forest-Hill-Case/60200 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...
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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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...To: Group 2 From: Britany Kouba Date: 9/24/2015 Subject: Forest Hill Paper Company Forest Hill Paper Company is a small closely-held manufacturing company that produces paperboard in large reels. Their strategy is to produce a full range of products and to create a niche by focusing on customer service and rapid response to customer needs. The company is currently producing twenty different grades of paperboard. Forest Hill competes against large companies in a commodity market, which is why they strive for having a variety of products and services. One issue facing the company is that paperboard industry’s demand fluctuates every three or four years. Therefore, the company will have large orders for a couple years and then minimal orders for a couple years. During the high demand years, the demand for paperboard exceeds the company’s capacity. Additionally, market share for domestic paperboard is declining as trends are growing for plastic and more environmentally friendly grades of paperboard. Forest Hill also has a large variety of products with different costs. Some of their products use more materials and take a longer time to produce, making the cost higher. As a team, we should look at how the company is figuring out costs for each product and understand the costs that come with manufacturing the different products. We should also look at how slitting and grade changes affect cost. The team needs to look at what the cost drivers are. Within the next...
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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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...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 demand...
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...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...
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