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 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. Investing

    What's a Run Rate?

    Run rate is a term used to denote annualized earnings extrapolated from a shorter time frame. Management uses the run rate to estimate future revenues.
  6. Professionals

    Financial Accounting

    Financial accounting is the process of gathering, recording, summarizing and reporting financial data relating to a business. The ultimate goal is to accurately report the financial picture and ...
  7. Investing

    What are Direct Costs?

    Direct costs for finished goods refer to the items and services directly used in production. Other costs such as rent and insurance for the production site are indirect costs. These costs may ...
  8. Investing

    What is Contingent Liability?

    A contingent liability is an amount that might have to be paid in the future, but there are still unresolved matters that make it only a possibility. Lawsuits and the threat of lawsuits are the ...
  9. Investing

    What's Accrued Interest?

    Accrued interest has two meanings. In accounting, it is interest that has been earned, but the time for payment has not yet occurred.
  10. Investing

    What is Absorption Costing?

    Absorption costing is an accounting method primarily used in manufacturing. In absorption costing, the cost of a manufactured product includes the direct costs plus an apportioned share of the ...

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center