Super Project Case
1.
The relevant cash flows for General Foods are the following: sales and cost of goods sold for the Super
project, erosion of Jell-O contribution margin, selling expenses, income tax, capital expenditures,
opportunity costs for using excess agglomerator capacity, and increases in the net working capital.
a. Test-market expenses, which were included in the first period, are sunk costs because they had
been already expensed for feasibility of the Super project. Therefore, the management should not
include the test-market expenses into calculation of the cash flows.
b. The management did not include the overhead costs into the calculations, but the managerfinancial
analysis proposed to embrace the costs in Alternative 3. However, the management
should not include overhead expenses because overhead expenses affect many areas of the
business and are not attributable to a particular business activity. Only additional overhead
expenses that arise of the......

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Title: Super Project
Approximate Word Count: 1063
Approximate Pages: 5 (250 words per double-spaced page)

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