Case Study - Forest Hill - Chapter 5 ABC
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 strategy of producing a full range of products.
While product diversity within a paperboard plant would not be readily apparent to the casual observer, subtle differences exist. For example, paperboard differs by basis weight (or thickness as determined by caliper measurements) 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 smoothes surface variability. Customers
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 strategy of producing a full range of products.
While product diversity within a paperboard plant would not be readily apparent to the casual observer, subtle differences exist. For example, paperboard differs by basis weight (or thickness as determined by caliper measurements) 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 smoothes surface variability. Customers