Super Project will eat into the Jell-O Sales and this must be
taken as a cost for the project when making the final decision.
c) Super project’s share ($453K) of the building and agglomerator
capacity
a. Unlike the previous two cash flows where we considered them
based on the direct impact they bring, the super project’s share
of the building and agglomerator capacity must not be
considered in our cash flow for the following reasons:
i. The expense of the building was already included when
estimating costs for Jell-O project and thus this incurred
cost must not be counted twice.
ii. Yes it might be true that the unused physical space in
the factory might be better utilized for Jell-O to increase
its profits, however we are considering that in cash flow
(b).
iii. => We will not count Supoer Project’s share of the
building and agglomerator capacity in our cash flow
calculations.
Note: Overhead expenses are calculated from information provided on page 17
where we subtract profit for Facilities Used Basis approach from Fully allocated
approach and account for the 6 year average that we need.