(Prove the overhead rate is 105% of material cost.) Calculate the volume-based (traditional) cost per reel for grades A-D identified in Exhibit 1. What is the cost for Forest Hill to conduct a grade change? 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. Calculate the new volume-based overhead rate after removing grade change and slitting costs. Determine the activity-based costs for grades A-D Prepare a table that illustrates the percentage change in costs between the volume-based system and the strategic activity-based system. What conclusions can you draw from your analysis? As a consultant to Forest Hill, what actions would you
(Prove the overhead rate is 105% of material cost.) Calculate the volume-based (traditional) cost per reel for grades A-D identified in Exhibit 1. What is the cost for Forest Hill to conduct a grade change? 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. Calculate the new volume-based overhead rate after removing grade change and slitting costs. Determine the activity-based costs for grades A-D Prepare a table that illustrates the percentage change in costs between the volume-based system and the strategic activity-based system. What conclusions can you draw from your analysis? As a consultant to Forest Hill, what actions would you