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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Explain the difference between independent projects and mutually exclusive projects.

To determine

Differentiate between independent projects and mutually exclusive projects.

Explanation

Independent Projects and Mutually Exclusive Projects:

When acceptance or rejection of a project does not affect the cash flows of other projects, it is known as an independent project whereas when acceptance of a project disqualifies all other contesting projects, it is known as a mutually exclusive project.

BasisIndependent ProjectsMutually Exclusive Projects

Effect on

other projects

The acceptance or

rejection of independent

 projects does not affect

 the acceptance of rejection

of other projects.

The acceptance of a mutually

exclusive project disqualifies

all the other competing

projects.

Number of projects

More than one independent

projects may be accepted

at a given time

Only one mutually exclusive

project can be accepted at a

particular time.

Cash flow

The acceptance of an

independent project does

not affect the cash flows

of the other independent

 projects.

The acceptance of a mutually

exclusive project affects

the cash flows of other

projects.

Table (1)

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