Budgeting & Financial Management Flashcards

A chiller retrofit costs $120,000 and is expected to save $30,000 per year in energy. What is the simple payback period?

Answer: 4 years

Simple payback equals initial cost divided by annual savings: $120,000 / $30,000 = 4 years.

Which statement best describes zero-based budgeting for a maintenance department?

Answer: Every expense must be justified from zero each budget cycle

Zero-based budgeting requires each line item to be justified anew rather than based on prior spending.

A full roof replacement that extends the building's useful life by 20 years should normally be classified as what?

Answer: A capital expenditure

Expenditures that add value or substantially extend asset life are capitalized rather than expensed.

The HVAC repair budget was $50,000 but actual spending was $56,000. How is this variance described?

Answer: $6,000 unfavorable (12%)

Spending over budget is unfavorable, and $6,000 / $50,000 budget = 12%.

Using straight-line depreciation, what is the annual depreciation on a $200,000 boiler with a $20,000 salvage value and a 10-year life?

Answer: $18,000

Straight-line depreciation is (cost - salvage) / life = $180,000 / 10 = $18,000 per year.

Which set of costs is included in a life-cycle cost analysis of building equipment?

Answer: Acquisition, operation, maintenance, and disposal costs

Life-cycle costing captures all costs of owning an asset from acquisition through disposal.

Which of the following is typically a fixed cost in a building maintenance budget?

Answer: Annual property insurance premium

Insurance premiums stay the same regardless of building activity or occupancy levels.