CPWM Financial Planning & Budgeting 3

Question 1

Which type of cost remains constant regardless of the volume of service provided, such as a monthly lease on a facility?

Accepted Answer

Fixed cost

Answer

Fixed costs do not change with service volume within a relevant range, making them predictable but inflexible budget elements.

Question 2

A public works department applies for a federal formula grant. Unlike discretionary grants, formula grants are distributed based on:

Accepted Answer

Statutory criteria such as population or lane miles

Answer

Formula grants allocate funds using predetermined statutory factors, giving eligible governments a predictable entitlement rather than requiring competitive application.

Question 3

Which cost allocation method distributes indirect costs to departments based on the proportion of a single measurable factor such as square footage or FTEs?

Accepted Answer

Single-rate allocation

Answer

Single-rate allocation simplifies indirect cost distribution by using one allocation base, though it may be less accurate than multi-factor methods.

Question 4

A city's five-year capital improvement plan (CIP) projects a $2 million street resurfacing project in Year 3. The most important financial reason for including it in the CIP now is:

Accepted Answer

To allow time to secure funding and plan cash flow

Answer

Early inclusion in the CIP enables the government to identify funding sources, apply for grants, and plan debt issuance well before the project must begin.

Question 5

When evaluating a lease-versus-purchase decision for a large piece of public works equipment, the analysis should include:

Accepted Answer

Total life-cycle costs, financing costs, and tax implications

Answer

A proper lease-versus-purchase analysis discounts all future costs to present value and includes maintenance, interest, residual value, and fiscal constraints.

(CPWM) Certified Public Works Manager Practice Test

(CPWM) Certified Public Works Manager Practice Test

CPWM Financial Planning & Budgeting 3