# Forest Hill Report Final Draft Essay

Submitted By martyhogan24
Words: 1186
Pages: 5

Forest Hill Paper Company

Activity-Based Costing Analysis

Report

Prepared by:
Martin Hogan
Berenise Flores
Trevor Hohbein
Group 2
Jina Morris
Acct. 308 Sec. 152

On:
October 31, 2014Executive Summary

Volume-based Costing versus ABC

We know our findings to be true based on the analysis we conducted, which will be discussed in this section. First, we proved that the overhead rate under the current system is actually 105 percent of the material cost. We did this by multiplying material cost per reel by average reels per batch for each product and summing the four to determine a total material cost of \$1,741,400. Total overhead costs of \$1,828,470 were provided in Exhibit 2, and we simply divided total overhead cost by total material cost to determine a rate of 105 percent (see Appendix).

Next, we determined the total volume-based cost of each reel. We found this by adding the material cost per reel and the overhead cost per reel.

Product
Material Cost per Reel
Volume-Based Total Cost per Reel
A
\$4,800.00
\$5,040.00
\$9,840.00
B
\$5,200.00
\$5,460.00
\$10,660.00
C
\$5,600.00
\$5,880.00
\$11,480.00
D
\$7,400.00
\$7,770.00
\$15,170.00

By utilizing this new strategy of activity-based costing, we found the following total costs per reel and variances in costing methods.

Product
Material Cost per Reel
Slitting Cost per Reel
Activity-Based Total Cost per Reel
A
\$4,800.00
\$4,372.80
\$235.00
\$2,294.12
\$11,701.92
B
\$5,200.00
\$4,737.20
\$5,875.00
\$0.00
\$15,812.20
C
\$5,600.00
\$5,101.60
\$335.71
\$2,294.12
\$13,331.43
D
\$7,400.00
\$6,741.40
\$67.14
\$0.00
\$14,208.54

Product
Volume-Based Total Cost per Reel
Activity-Based Total Cost per Reel
Change in