Mini- case study: Global Green Book Publisher a).Type of direct costs identified Direct costs are those costs which vary with the level of production. Types of direct costs identified are; Material costs –these includes all permission costs for contents and images used in the eBook. These costs are direct costs because they are directly connected to publishing of each eBook. b) Two forms of costs identified are;
Direct costs –these are direct costs attributable to production of each eBook which includes; permission cost for the content in the book and the cost of images used in publishing each eBook. Indirect costs – these are those costs that Global Green Book Publisher cannot connect to a specific eBook produced. These costs are; computer costs incurred and the sales commission for each eBook project.
c).possible problems that might arise and impact the budget.
Unrealistic assumptions when budgeting may lead to failure in budgeting. Change in economic conditions may lender the budget unrealistic. Inadequate resources may lead the budget hard to achieve.
d). Global Green Book Publisher should set aside contingencies during budgeting for Catering additional costs or unexpected costs during budgeting process. When the budget exceed the estimates, more sources of cash should be sorted or the budget should be reduced to fit the estimates. e) Main cost drivers in the project;
Direct hours worked Permission needed Inspection costs Scanners installing costs Selling of the books marketing Number of orders processed Machine hours machine acquisitions
f). other information that need to be included in the project includes;
Industry standards- industry standards should be considered in order to make the budget realistic number of books sold in order to determine the amount of sales commission and the total amount of sales
Past budgets- this will help in predicting the future Hours for acquiring permission for the calculation of total direct permission cost. Number of permission in order to calculate total permission costs.
European History eBook project budget Phase Receiving order
Task Receive Check Verify
Rate ($) $12 $12 $16
Plan
Plan Assign Estimation Reserve equipment
Production
Manage production
28 28 28 28
Hours 0.25 0.50 1 Total 1 1 1 0.5
Total ($) $3 $6 $16 $25 $28 $28 $28 $14
Permission Publishing Content conversion Produce Quality check
$22 18 12.5
Total 0 12.5 4
$98 $22 $225 $50
Tracking
$28
5 3 1 Total 3
$90 $48 $16 $429 $84
Total direct cost
$636
18 16 16
Production overhead Production overhead at $1.50 on all direct labour costs Receiving labour cost $25*1.50 = $37.50 Planning labour cost $98 * 1.50 =$147 Production labour cost $429*1.50 = $643.50 Managing production labour cost $84*1.50 = $$126 Total production overhead =($37.50 + $147 + $643.50 $126) = $954 Indirect costs Material costs of $1,000 per permission Equipment costs of $800 Subcontract labour of $500
Computer costs of $600 Contingency on labour (10%*$954) = $95.40 Contingency on permission (20% * 1000) = $200 Total indirect cost = $3195.40 Total costs (direct + indirect costs) = $3195.40 + $954 + $636) = $4785.40
