CMM Budgeting & Financial Management 2

Question 1

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

Accepted Answer

4 years

Answer

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

Question 2

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

Accepted Answer

Every expense must be justified from zero each budget cycle

Answer

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

Question 3

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

Accepted Answer

A capital expenditure

Answer

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

Question 4

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

Accepted Answer

$6,000 unfavorable (12%)

Answer

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

Question 5

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?

Accepted Answer

$18,000

Answer

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

CMM - Certified Building Maintenance Manager Practice Test