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Kareem

Mini-Case Study: Cost Estimation at Global Green Books Publishing Global Green Books Publishing is continuing to produce
customized eBooks as a key new product line for it as a successful printing and publishing company. It has developed a template to
help plan job orders. The major customer for these customized eBooks is a local college, who expected these books to be delivered
at a low cost, and the company has not always been doing that. The Accounting department in Global Green Books was having
difficult tracking the costs for each of the books. Each eBook had a separate job order prepared that listed all the steps that needed
to be completed, so that tasks could be assigned to each worker and costs estimated. With the existing job orders, estimates of time
required for each task were sometimes not completed until after the work was done, causing problems as workers were supposed to
move on to new tasks but were still finishing their previous tasks. Some tasks required specialized equipment or skills, sometimes
from other groups within Global Green Books. Along with its template for job orders, Global Green Books wanted to start developing
a project estimate for each new eBook project. This cost estimate should capture direct costs and indirect costs. The direct costs for
an eBook project include labor costs for those in the company working on the project, materials costs (if any), subcontractor or
outside labor, and equipment and facility costs. Material costs for these eBooks include any permissions costs for content and
images used in the eBook. Indirect costs for these eBooks computer support costs and sales commissions for each eBook project.
For an incoming eBook order for an eBook for a European History course, the following internal labor costs are projected during the
Plan Order Phase:

During the Plan Order Phase, the hours for the Receive Order phase (marked with an *) are actual times, as this work has already
been performed. In addition to these internal labors costs, the Production Supervisor has estimated that the European History eBook
will incur these costs:
An overhead rate on all direct labor of 1.50.
Material costs of $1,000 for each permission needed
Equipment costs of $800 for unique equipment needed for this project (a special oversize map scanner)
Subcontract labor of $500 for installation and training in the use of the oversize map scanner
Computer support costs of $600
Sales commission of 20%

In addition to direct and indirect costs, Global Green Books targets a 25% profit margin on each project, and budgets for a 10%
contingency on labor and 20% contingency on permissions.