Project Classifications and Mutually Exclusive Projects

Managerial Accounting for Managers
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Managerial Accounting for Managers
Classification of projects is an extremely important procedure for businesses (Siziba & Hall 2019). In the process of capital budgeting, project classifications are used in several ways. First, they are used to map the complexity of each project that is being determined. Without a doubt, an understanding of the complexity of a project is key to appropriate preparations. Secondly, the classification of projects helps firms in determining the kind of analysis that is required for the appropriate evaluation of a project. Thirdly, classifications are used to identify possible unnecessary costs/ inefficiencies and eliminate them. Mutually exclusive projects is a term used in the capital budgeting process to refer to a project which when chosen, will automatically lead to a rejection of the others. The company uses some criteria to identify the best project to undertake sinc...