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Cost Estimation at Global Green Books Publishing

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:

Phase

Task

Staff

Category

Rate

($)

Hours

Receive Order

Receive Order

Customer Service Representative

CSR

12.00

.25 *

Receive Order

Check Order

Customer Service Representative

CSR

12.00

.50 *

Receive Order

Verify Order

Customer Service Representative

CSR-1

16.00

1.0 *

Plan Order

Plan Work

Supervisor

Senior-1

28.00

1.0

Plan Order

Assign Work

Supervisor

Senior-1

28.00

1.0

Plan Order

Estimation

Supervisor

Senior-1

28.00

1.0

Plan Order

Reserve Equipment

Supervisor

Senior-1

28.00

.50

Production

Acquire Permissions

Publishers Liaison 

PL

22.00

0

Production

Desktop Publishing (DTP)

DTP Specialist

DTP-2

18.00

12.5

Production

Content Conversion

DTP Specialist

DTP-1

12.50

4.0

Production

Produce eBook (Proof and Final)

DTP Specialist

DTP-2

18.00

5.0

Production

Quality Checks

Quality Technician

Customer Service

Representative

QC

CSR-1

16.00

16.00

3.0

1.0

Manage Production

Track Production

Supervisor

Senior-1

28.00

3.0

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.

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