Budgeting & Financial Management Flashcards

Pump A costs $8,000 with $3,000 annual energy costs; Pump B costs $11,000 with $2,000 annual energy costs. Over a 10-year life (ignoring discounting), which is the better choice?

Answer: Pump B, because its total 10-year cost is $31,000 vs. $38,000

Pump A totals $8,000 + $30,000 = $38,000 while Pump B totals $11,000 + $20,000 = $31,000.

What is a rolling forecast in facility budgeting?

Answer: A forecast updated regularly to always project a fixed period ahead

Rolling forecasts are refreshed periodically, such as quarterly, to keep a consistent forward-looking window.

An $80,000 efficiency project qualifies for a $20,000 utility rebate and saves $15,000 per year. What is the simple payback after the rebate?

Answer: 4 years

Net cost is $80,000 - $20,000 = $60,000, and $60,000 / $15,000 = 4 years.

Which cost is most likely to be variable in a facility operating budget?

Answer: Janitorial supplies that increase with building occupancy

Variable costs rise and fall with activity levels such as occupancy or usage.

What should a monthly budget variance report include beyond the numbers?

Answer: Explanations of significant variances and planned corrective actions

Variance reports are useful to management when they explain causes and responses for major deviations.

An annual operating budget for a maintenance department typically covers which period?

Answer: One fiscal year

Operating budgets fund recurring expenses over a single fiscal year.

What is a sinking fund in facility financial management?

Answer: Money set aside periodically to pay for a future replacement or obligation

Sinking funds accumulate regular contributions so major future costs can be paid without borrowing.