Total Project Approach


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. . 2012.

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