The Super Project

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Assignment for “The Super Project” Case Questions for Case Analysis: 1. What are the relevant cash flows for General Foods to use in evaluating the Super Project? In particular, how should management deal with the issues such as: * Test-market expense? * This expense is much more important than a mere number of 360k because this is what has indicated the potential of the Super that it would capture 10% of the entire product market out of which 80% is from growth and 20% from erosion. Since this market test indicates that the powder market is significantly increasing which cannot be ties to just super project as it also relates to Jell-o. I would not consider this cost as it cannot be tied to just Super and also is a sunk cost. * Overhead expense? * Not sure if overhead expense make sense if most of the capacity used by Super Proj is part of Jell-O and since it is already considered and added to the investment cost. There will be increase in overhead with the growth, it cannot be considered like a totally new investment. Most of the overhead costs in this scenario are already fixed costs. * Erosion of Jell-O contribution margin? * Yes. I would consider erosion of Jell-o cost as it is significant which is 20% and we have to consider that it is also growing at the same rate as powder market. This 20% erosion and with the growth rate, Jell-O could have got more than 20% even if the super project does not exist. * Allocation charges for excess capacity? * Considering the overall growth in the dessert market in future, there can be easily expected to use the unused capacity of Jell-O either by increase in sales of Jell-O or by another new product. This implies that this capacity is not lost and it has to be allocated to the super project if not the entire remaining capacity, it has to be atleast 80% of the

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