- 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.
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.
Investment dictionary. Academic. 2012.
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