Maria Waheed

2367127

Case Study
Comment on the following aspects of the case study:

a) What are the types of direct costs identified in this case? Why are they viewed as direct
costs?

In this case study, several types of direct costs are identified:

1. Labor Costs: These include the wages or salaries of employees directly involved in producing the
customized eBooks, such as Customer Service Representatives (CSR), Supervisors, Desktop Publishing
(DTP) Specialists, Quality Technicians, and Publishers Liaison .
2. Materials Costs: This includes the cost of permissions for content and images used in the eBook. These
costs are directly attributable to the production of a specific eBook project and are therefore considered
direct costs.
3. Subcontractor or Outside Labor Costs: Costs incurred for hiring external labor for tasks like installation
and training in the use of specialized equipment (e.g., oversize map scanner) are direct costs because they
are directly tied to the production of the eBook project.
4. Equipment and Facility Costs: Costs related to unique equipment needed for a specific project (e.g.,
oversize map scanner) are direct costs because they are essential for the production of the eBook and are
specific to each project.
b) What are two forms of costs identified?

1. Direct Costs: These are costs directly attributable to the production of each eBook project. They include:
 Labor Costs: Wages or salaries for employees directly involved in eBook production, such as
Customer Service Representatives, Supervisors, Desktop Publishing Specialists, and Quality
Technicians.
 Materials Costs: Costs associated with obtaining permissions for content and images used in the
eBook.
 Equipment and Facility Costs: Costs related to specialized equipment and facilities needed for
the project, like the oversize map scanner.
2. Indirect Costs: These are costs that are not directly tied to the production of a specific eBook project but
are necessary for overall operations. They include:
 Overhead Costs: Applied as an overhead rate on direct labor costs.
 Computer Support Costs: Costs related to providing IT support for eBook production.
 Sales Commissions: Costs associated with compensating sales personnel for each eBook project.

c) What are some problems that might arise that could impact the budget?
Several potential problems could arise that might impact the budget for Global Green Books Publishing's
eBook production:
1. Inaccurate Time Estimates: If the estimates of time required for each task are not accurate, it can lead to
underestimated labor costs. This can happen when tasks take longer than expected, causing delays in
project completion and potentially leading to additional labor costs.
2. Unexpected Equipment Costs: Specialized equipment, such as the oversize map scanner mentioned in
the case study, may have associated costs beyond the initial estimate. This can include maintenance,
repairs, or unexpected requirements for using the equipment effectively.
3. Quality Assurance and Rework: Quality checks may identify issues that require rework or corrections,
leading to additional labor costs not initially accounted for in the budget. Rework due to quality issues
can also impact project timelines, potentially causing further budgetary challenges.
4. Fluctuations in Sales Commissions: Sales commissions, which are calculated as a percentage of project
revenue, can vary based on actual sales performance. If sales volumes or pricing change unexpectedly, it
can affect the budgeted amount for sales commissions.

d) Why would Global Green Books set aside contingencies? How would needed
rework, if caught in the quality reviews, be accounted for in the budget?

1. Managing Uncertainties: Projects often encounter unforeseen challenges such as delays, additional labor
requirements, unexpected material costs, or changes in scope. Contingencies provide a financial cushion
to address these uncertainties without derailing the project or exceeding the allocated budget.
2. Budget Flexibility: Contingencies allow for flexibility in managing budgetary fluctuations. They provide a
safety net to cover unexpected expenses without requiring immediate adjustments to the main budget or
compromising the project's financial health.
3. Quality Assurance and Rework: Quality reviews are crucial for ensuring that deliverables meet
established standards and client expectations.

e) What are the main cost drivers of this project?

The main cost drivers of this project can be identified from the detailed cost breakdown provided in the
case study. Here are the main cost drivers for the European History eBook project:

1. Labor Costs: Labor costs are a significant driver, encompassing various tasks and roles within the project.
Different staff categories with their hourly rates contribute to the overall labor expenses.
2. Material Costs: Material costs include permissions costs for content and images used in the eBook. For
the European History eBook, there is a specific cost associated with acquiring permissions, which is $1,000
for each permission needed.
3. Equipment Costs: Unique equipment needed for the project incurs costs. In this case, the special oversize
map scanner required for the European History eBook project has an associated cost of $800.
4. Computer Support Costs: Computer support costs are essential for ensuring smooth production
processes, and they are a direct cost associated with project execution. The computer support costs for
the European History eBook project are estimated at $600.
5. Sales Commission: Sales commission is another cost driver, representing a percentage of the project's
total value. In this case, a 20% sales commission is applied to the project.

F)What other information, if any, would you like to see included in the budget for this
project? Why?
1. Training and Development Costs: If there are any specific training programs or courses required for staff
members to work on this project effectively, including associated costs for training materials, external
trainers, or online training platforms would be important. Well-trained staff can improve efficiency and
reduce errors.
2. Quality Assurance and Testing Costs: Allocate a budget for quality assurance processes, including
testing the eBook across different devices and platforms to ensure compatibility, functionality, and overall
user experience.
3. Project Management Costs: Include expenses related to project management activities such as project
planning, coordination, communication tools or software, and oversight throughout the project lifecycle.
4. Sustainability and Compliance Costs: If there are specific sustainability standards or compliance
requirements relevant to eBook production, factor in costs associated with meeting these standards.
5. Documentation and Reporting Costs: Budget for documentation efforts such as creating project
reports, progress updates, and documentation of processes, especially for compliance or auditing
purposes.

Create a budget for the European History eBook project.

a) What are the costs by major phases of work for making this European History
eBook?

This phase involves activities related to planning and organizing the eBook project.

Direct Costs:

 Internal Labor Costs:

 Customer Service Representative (CSR) tasks: $12/hour
 Supervisor (Senior-1) tasks: $28/hour

Indirect Costs:

 Overhead Rate on Direct Labor: 1.50

 Contingency on Labor: 10%

2. Production Phase:

This phase includes tasks related to content creation, permissions, desktop publishing, quality checks, and
project management.

Direct Costs:

 Internal Labor Costs:

 Customer Service Representative (CSR) tasks: $16/hour
 Desktop Publishing (DTP) Specialist tasks: $12.50 - $18/hour
 Quality Technician tasks: $16/hour
 Supervisor (Senior-1) tasks: $28/hour
  Material Costs:
 Permissions: $1,000 each
 Equipment (special oversize map scanner): $800
 Subcontract labor (installation/training): $500

Indirect Costs:

 Computer Support Costs: $600

 Sales Commission: 20%
 Contingency on Permissions: 20%

b) What are the total costs for direct labor?

1. Plan Order Phase:

Direct Labor Costs:

 CSR Tasks: 0.25 hours * $12/hour = $3.00

 Supervisor Tasks: (1 + 1 + 1 + 0.50) hours * $28/hour = $98.00

2. Production Phase:

Direct Labor Costs:

 CSR Tasks: (16 hours + 16 hours + 3 hours + 1 hour) * $16/hour = $480.00

 DTP Specialist Tasks: (12.5 hours + 4 hours + 5 hours) * $18/hour = $283.50
 Quality Technician Tasks: (3 hours + 1 hour) * $16/hour = $64.00
 Supervisor Tasks: 3 hours * $28/hour = $84.00

Total Direct Labor Costs:

Total Direct Labor Costs = Direct Labor Costs in Plan Order Phase + Direct Labor Costs in Production
Phase

Total Direct Labor Costs = ($3.00 + $98.00) + ($480.00 + $283.50 + $64.00 + $84.00)

Total Direct Labor Costs = $644.00 + $911.50

Total Direct Labor Costs = $1555.50

The total costs for direct labor for the European History eBook project amount to $1,555.50

b) What is the total estimated cost of this European History eBook?

1. Direct Costs:
1.1 Direct Labor Costs: We previously calculated the total direct labor costs to be $1,555.50.

1.2 Material Costs:

 Material costs of $1,000 for each permission needed = $1,000

1.3 Equipment Costs:

 Equipment costs of $800 for the oversize map scanner

1.4 Subcontract Labor:

 Subcontract labor costs for installation and training = $500

2. Indirect Costs:

2.1 Overhead Rate on Direct Labor:

 Overhead rate on all direct labor of 1.50

2.2 Computer Support Costs:

 Computer support costs = $600

2.3 Sales Commission:

 Sales commission of 20%