Total Project Approach

AAA

DEFINITION of 'Total Project Approach'

A way to compare net income or contribution margin results by looking at the revenue and cost of a project. The total project approach looks at two alternative choices and compares the net income or contribution margin of the two choices.


Also referred to as comparative statement approach.

INVESTOPEDIA EXPLAINS 'Total Project Approach'

For example, a company is planning to expand production and wants to buy a new machine for this purpose. The new machine will cost $50,000 and has a life-span of five years. The machine it is replacing also has a remaining life of five years with a book value of $12,500. Being that it is a new and more efficient machine, the new purchase will reduce variable operating costs from $25,000 to $15,000 annually.

RELATED TERMS
  1. Comparative Statement

    A statement which compares financial data from different periods ...
  2. Continuation Statement

    An amendment that is attached to a borrower's financing statement ...
  3. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  4. Cash Flow Statement

    One of the quarterly financial reports any publicly traded company ...
  5. Condensed Financials

    A summary form of a company's earnings statement, balance sheet ...
  6. Convention Statement

    A document filed by an insurance or reinsurance company that ...
RELATED FAQS
  1. How are contingent liabilities reflected on a balance sheet

    Contingent liabilities need to pass two thresholds before they can be reported in the financial statements. First, it must ... Read Full Answer >>
  2. How do businesses determine if an asset may be impaired?

    In the United States, assets are considered impaired when net carrying value (book value) exceeds expected future cash flows. ... Read Full Answer >>
  3. What is the relationship between the hurdle rate (MARR) and the Internal Rate of ...

    In capital budgeting, projects are often evaluated by comparing the internal rate of return, or IRR, on a project to the ... Read Full Answer >>
  4. How can I set up an accrual accounting system for a small business?

    First, determine whether accrual accounting makes the most sense practically and financially. If the small business is also ... Read Full Answer >>
  5. Why is work in progress (WIP) considered a current asset in accounting?

    Accountants consider work in progress (WIP) to be a current asset because it is a type of inventory asset. Accountants consider ... Read Full Answer >>
  6. What are some ways a company can improve on its Return on Capital Employed (ROCE)?

    Options available to a company seeking to improve on its return on capital employed (ROCE) ratio include reducing costs, ... Read Full Answer >>
Related Articles
  1. Active Trading

    Competitive Advantage Counts

    What's the best indicator of a company's future success? Its ability to succeed when others fail.
  2. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  3. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  4. Entrepreneurship

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  5. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  6. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  7. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  8. Economics

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  9. Fundamental Analysis

    Why Last In First Out Is Banned Under IFRS

    We explain why Last-In-First-Out is banned under IFRS
  10. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center