Case study 4

Cost Estimation at Global Green Books Publishing

Q.1. What are the types of direct costs identified in this case? Why are they viewed as direct
costs?
Ans: Identifying the types of direct costs 
The costs that fluctuate with the degree of production are known as direct costs. 
The following are examples of direct costs: 
Material costs - these include all costs associated with obtaining permissions for the eBook's t
ext and photos. 
These are direct costs because they are linked to the publication of each eBook.

Q.2. What are two forms of costs identified?

Ans: There are two types of costs that have been identified: 
Direct costs - these are costs directly related to the production of each eBook, such as the cost 
of obtaining permission for the content in the book and the cost of photographs used in the pu
blication of each eBook. 
Indirect costs are expenses that Global Green Book Publisher is unable to link to a single eBo
ok generated. 
These expenses include the cost of the computer and the sales commission for each eBook pu
blication.

Q.3. What are some problems that might arise that could impact the budget?
Ans: Difficulties that may develop and have an influence on the budget 
When planning, unrealistic assumptions can lead to budgeting failure. 
Changes in the economy may make the budget unrealistic. 
Inadequate resources may make meeting the budget difficult.
Q.4. Why would Global Green Books set aside contingencies? How would needed rework, if
caught in the quality reviews, be accounted for in the budget?
Ans:
During the planning process, the Global Green Book Publisher should set aside contingencies 
for higher catering expenditures or unforeseen charges. 
When the budget exceeds the forecasts, more funding sources should be identified, or the bud
get should be cut to suit the estimates.

Q.5. What are the main cost drivers of this project?

Ans:
 The project's main cost drivers are: 
 Worked direct hours 
 Permission is required. 
 Inspection fees are incurred. 
 The expense of deploying scanners. 
 The books are being sold. 
 marketing. 
 The total number of orders completed. 
 Hours spent on the machine 
 acquisitions of machines

Q.6. What other information, if any, would you like to see included in the budget for this
project? Why?
Ans: 1. Industry standards should be taken into account in order to keep the budget in check.
2. To compute the sales commission and total sales, the entire number of books sold must be
totalled.
3. Budgets from the past will help anticipate the future.
4. The total direct permission fee will be calculated based on the number of hours spent
seeking permission.
5. Based on the amount of rights given, the total permission charges are computed.