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. Cost Test

    A standard test applied to a process to determine if the net ...
RELATED FAQS
  1. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  2. What Book Value Of Equity Per Share (BVPS) ratio indicates a buy signal?

    Book value of equity per share (BVPS) is a ratio used in fundamental analysis to compare the amount of a company's shareholders' ... Read Full Answer >>
  3. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  4. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  5. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... Read Full Answer >>
  6. What are some of the limitations and drawbacks of using a payback period for analysis?

    Limitations, or disadvantages, of using the payback period method in capital budgeting include the fact that it fails to ... 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

    Calculating Net Realizable Value

    An asset’s net realizable value is the amount a company should expect to receive once it sells or disposes of that asset, minus costs from its disposal.
  6. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  7. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.
  8. Economics

    What are Capital Goods?

    Capital goods are assets with a useful life of more than one year that are used for the production of income.
  9. Economics

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  10. Fundamental Analysis

    What is Year-to-Date?

    Year-to-date (YTD) is a term that describes financial results from the beginning of the current year up to the day the financial number is reported.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!