TOP QUALITY NEEDED

I would like to answer the case study’s questions, and please do it in three documents.

Report format:

Word Document 4-5 Pages

Executive Summary (max 1 page) –you should write this AFTER you have completed the whole case study questions.

  • It is an Executive Summary. be sure it is effective that I will understand the issues and the recommendations after reading this?
  • Please note (please write a report without mentioning the questions and the answers the report should discuss the case and at the same time answering the questions.
  • Any calculations should be completed in Excel® and then copied into your master Word® document. Discuss the calculations and number in the verbiage, do not just list calculations without discussion or as exhibits at the end of the document. Submit the separate Excel® file.

You should organize the report as follow:

  • Executive summary.
  • Introduction
  • Discussing and answering the questions.
  • Discussing calculations.
  • Last is the recommendations and the conclusion.

Excel sheet

PowerPoint 5-6 slides

Prepare a PowerPoint Presentation that summarizes the answers and discuss the calculations to the Case questions.

Hello,

I hope you are doing well, thank you for helping me with this assignment, Would you please note that I requested a refund for the same job from another tutor due to lack of information and lack of quality. I hope you do it in much better way the previous one.

I will send you my comment in the previous tutors’ work.

Best regards

These are my comments to him below:

I reviewed the work unfortunately I have many comments on the quality of the work, please find them below:

1- First of all the whole assignment answers have the same ideas as the answers in (course hero website) even the same flow of sentences but by paraphrasing these sentences.

2- The executive summary should be done after you finish all answers to sum everything in that summary even the recommendations, unfortunately the instructions were not followed.

3- most of the calculations were wrong and those numbers which were copied from the case also wrong.

4- Also you rounding up all numbers while I need the numbers as its appear in the calculator.

5- The power point slides do not explain any of these calculations I was expecting at least one slide that talks about the calculations as I told you before its a PowerPoint presentation.

6- I checked even the results of the calculations that you gave me its different than what my colleagues having.

Please recheck the whole assignment again and correct all these major issues or if you cannot do it I am sorry to request a refund.

unfortunately, after my comments were sent to him, he didn’t even do the calculations in a proper way then i asked for a refund.

I am hoping this time will be much better than the old one, so please I need a high quality work so I can improve my grades, I don’t WANT to loose any marks for it, and at the same time I will confident to recommend you to my colleagues.

Again I appreciate your help and your time as well.

Sincerely 

IntroductIon

Forest Hill Paper Company (FHPC) is a small, closely-held

paperboard manufacturer that produces a broad 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,

such as packaging for microwavable meals. The owners of

FHPC have long pursued the strategy of producing a full

range of products. As a small company competing against

large companies in 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.

While product diversity within a paperboard plant would not

be apparent to a casual observer, subtle differences exist.

For example, paperboard differs by basis weight (thickness

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 smooths surface variability. Customers

are increasingly concerned with surface variability because

an extremely smooth finish is required to accommodate

complex printed designs on the completed paperboard

container or carton.

FHPC produces 20 different grades of paperboard. Some

grades are produced in large quantities requiring production

runs of several days, while others are produced in smaller

quantities requiring runs of only a few hours. Consistent

with lean manufacturing principles, the company maintains

minimal inventories. Production schedules are driven by

two factors: market demand and the theoretically optimal

production schedule. The optimal production schedule is

designed to reduce waste associated with grade changes by

producing successive batches with minor differences in

basis weight.

competItIve envIronment

Paper and paperboard producers operate in a cyclical

economic environment, with upswings every three to four

years. In response to limited supply during an economic

boom, customers often double or triple the quantities

ordered. Then, they begin receiving their large orders as

the economy, once again, begins to slow. As a result, many

customers find their paper inventories exceed current needs

and temporarily stop placing orders. To further confound the

paperboard producers’ headaches, market share for domestic

paperboard has been declining. The most significant

contributors to the loss of market share are the trend toward

plastic and to more environmentally friendly grades of

recycled paperboard.

Throughout the industry, companies have made very

limited investments to expand capacity. When a surge in

demand for paper products occurs, demand will exceed

capacity. In boom times the industry experiences steep price

hikes resulting in record selling prices for most grades.

I m A e d u c At I o n A L c A S e J o u r n A L V O L . 1 , N O . 2 , A R T. 4 , J U N E 2 0 0 8 1

ISSN 1940-204X

Forest Hill Paper Company

Thomas L. Albright

University of Alabama

the mAnufActurIng proceSS

Pulp manufacturing begins with hardwood or softwood

timber in the form of logs or wood chips. If raw materials are

received in the form of logs, the first step in the process is

debarking. A rotating debarking drum that measures 16 feet

in diameter by 100 feet in length tumbles the logs to remove

the bark. After debarking, chippers reduce the logs into one-

inch cubes.

The second step in the process is termed “digesting.”

Wood chips are cooked at 325 degrees Fahrenheit to break

down the glue-like material bonding the wood fibers.

Chemicals used in the digestor are reclaimed and reused in

future pulp production. Following the digesting process,

the naturally brown fibers are washed and screened. A

bleaching process converts brown pulp into white pulp.

The paperboard manufacturing process begins by

mixing pulp with water and chemicals in the first stage,

or headbox, of a paper machine. The mixture is applied

to a porous wire mesh; formation of paper actually occurs

within this step. The wire mesh travels through a press

that forces the pulp mixture against the wire to eliminate

water within the mixture and to form the desired paper

thickness. The material then proceeds to a drying section

where it travels across numerous cylindrical dryers that are

heated with steam. In the final section of the paper machine,

long sections of paperboard (approximately five miles long

and weighing ten tons) are rolled up into parent rolls and

are removed from the machine. The parent roll is further

processed by FHPC’s customers to make various types of

paperboard containers.

Sometimes customers require additional processing on

parent rolls. For example, food processors often require

widths of 18 inches, rather than the standard width of a

reel (approximately 12 feet). Thus, reels are loaded onto

a rewinder slitter to produce eight reels 18 inches wide

from one 12-foot-wide reel. For convenience, Forest

Hill had always combined labor and machine costs of

the rewinder slitter with those of the paper machine for

allocation purposes. Thus, all grades of paperboard shared

in the costs of slitting even though most grades were not

slit. Engineering studies suggest slitting may be more

expensive than previously thought. In addition to the costs

of specialized equipment and extra labor, knives used in

the slitting process often damage the paperboard’s edges.

Thus, more quality inspection and testing are required when

producing slit reels.

Continuous processors, such as chemical and paper producers,

historically have used volume-related drivers to attach

overhead to products. Forest Hill traditionally applied

overhead to its products as a function of material costs.

Management believed using “material costs” as an allocation

base made sense because thicker products (containing more

material per lineal foot than thinner products) required more

machine time to process as they demanded slower machine

speeds. Additionally, drying time and energy consumption

increase with thicker basis weights. (See Exhibit 1 for material

costs associated with each product, or grade.) Thus, unit level

(or volume-related) drivers made sense for applying certain

types of overhead to products. However, other important costs

were incurred without respect to volume. For example, grade

changes induce instabilities into the manufacturing process

that result in scrap until the process resumes stability. On

average, production engineers estimate that approximately

one-half reel is lost to scrap each time a grade change is made.

Just as discrete-part manufacturers incur machine setup costs

between production runs of two different products, scrap

produced following grade changes is a predictable cost of

production. Some of the pulp can be recovered by recycling

the scrapped paper, termed “broke” paper. Thus, the grade

change cost figures presented in Exhibit 2 include only

depreciation, labor, energy, and lost chemicals associated with

grade changes.

Recently, some managers at the company began

questioning the long-standing strategic policy of producing

a full product line. Because selling prices and profit margins

significantly varied across the product mix, some managers

questioned whether the company’s assets were being

used to the greatest advantage. Currently Forest Hill was

experiencing demand in excess of its production capacity.

A sample representing significant categories of grades is

presented in Exhibit 1. The sample contains thin paperboard

grades (caliper .013) as well as heavier grades (caliper .020).

In addition, Exhibit 1 identifies whether a grade is coated or

uncoated, or slit. The sample is representative of the variation

in batch quantities. Some grades are produced and sold in

small quantities, while the market demands significantly more

production of other grades. Material cost per reel includes

pulp and chemical costs, while the selling price reflects recent

spot market prices.

Pulp and paperboard is a capital-intensive industry

requiring expensive processing equipment. Forest Hill’s

accountants estimated that manufacturing overhead,

including labor, energy, and depreciation on capital

equipment, approximates 105% of material costs.

I m A e d u c At I o n A L c A S e J o u r n A L V O L . 1 , N O . 2 , A R T. 4 , J U N E 2 0 0 82

Historically, product costs at Forest Hill were calculated

by multiplying the overhead rate by material costs. However,

brand managers had begun to suspect that some grades were

subsidizing others with respect to costs. Two significant

activities, grade changes and slitting, were identified to

help reduce cross-subsidy and provide more accurate cost

estimates. Exhibit 2 identifies total overhead costs with

respect to the four grades shown in Exhibit 1, estimated

grade change costs, and slitting costs. These costs are based

on one run of each grade.

The capital intensive structure of a paper company

coupled with the cyclical nature of the industry makes

accurate cost information an important strategic tool. Though

current demand exceeds existing capacity, managers at

Forest Hill know that a downturn is inevitable. Gaining an

understanding of the costs associated with grade changes

and slitting is a first step that will enable managers to more

effectively manage their business in good times and in bad.

requIrementS

1. How would you classify Forest Hill Paper Company in

terms of size and ownership?

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

competes?

3. Identify and discuss the strategy used by Forest Hill to

compete in a commodity market.

4. What are some examples of complexity that drive

overhead costs for Forest Hill?

5. How does the current system capture manufacturing

costs and assign them to products? (Prove the overhead

rate is 105% of material cost.)

6. Calculate the volume-based (traditional) cost per reel for

grades A-D identified in Exhibit 1.

7. What is the cost for Forest Hill to conduct a grade change?

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.

9. Calculate the new volume-based overhead rate after

removing grade change and slitting costs.

10. Determine the activity-based costs for grades A-D

11. Prepare a table that illustrates the percentage change in

costs between the volume-based system and the strategic

activity-based system.

12. What conclusions can you draw from your analysis?

As a consultant to Forest Hill, what actions would you

recommend?

I m A e d u c At I o n A L c A S e J o u r n A L V O L . 1 , N O . 2 , A R T. 4 , J U N E 2 0 0 83

exhibit 2
overhead Structure

total grade change Slitting net

Depreciation $800,000 $8,000 $70,000 $722,000

Labor 300,000 3,000 25,000 272,000

Energy 500,000 5,000 80,000 415,000

Other 198,470 1,000 20,000 177,470

Unrecoverable Clay and Chemicals
from Grade Changeovers 30,000 30,000 -0- -0-

total $1,828,470 $47,000 $195,000 $1,586,470

exhibit 1
Selected product grades with production and financial data

product Average material cost Selling price

(grade) caliper coated/uncoated Slit reels per Batch per reel per reel

A .013 Coated yes 50 $4,800 $12,600

B .014 Uncoated no 2 $5,200 $13,500

C .015 Coated yes 35 $5,600 $14,200

D .020 Coated no 175 $7,400 $19,500

I m A e d u c At I o n A L c A S e J o u r n A L V O L . 1 , N O . 2 , A R T. 4 T N , J U N E 2 0 0 84

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