Tembec Forest Products Division

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CASE STUDY. The Tembec case is designed to illustrate the use of activity-based costing (ABC) information to improve the division’s management control system.

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Description

Tembec Forest Products Division: Summary

Tembec Forest Products Division is a case study by Eduardo Schiehll, Hugues Boisvert and Martin Pelletier.

The Tembec case is designed to illustrate the use of activity-based costing (ABC) information to improve the division’s management control system. The case is particularly interesting because of its commodity industry setting. It covers the rationale for an ABC system and the basic design principles underlying this type of system.

The case can be used to:

  • Improve student understanding of ABC/ABM systems
  • Illustrate the use of ABC information in product profitability analysis
  • Demonstrate how ABC information can be useful for the product mix (or production scheduling) decision-making process

The issue at hand is that, since lumber products are commodities for which the current global demand is very unstable, lumber product margins do not necessarily follow additional resource consumption. As such, the division’s profitability control can be improved if the costing system allows evaluations of the product’s potential contribution margins at each stage of the manufacturing process. This enables rapid product mix response to market price variations.

Additional information

Download the Tembec: The Canadian Forestry Industry – Industry Note for an overview of the economic environment of the forestry industry in Canada.

Teaching notes are available for teachers only. Contact the HEC Montréal Case Centre for more information.

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