CSM Financial Management & Budgeting 3

Question 1

Which budgeting technique requires every expense to be justified from scratch each budget cycle, regardless of previous allocations?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting starts from a 'zero base' each period, requiring managers to justify all expenditures anew rather than adjusting prior-year figures.

Question 2

A software manager is preparing a capital expenditure request for a new development tool costing $200,000 with a 5-year useful life. Using straight-line depreciation, what is the annual depreciation expense?

Accepted Answer

$40,000

Answer

Straight-line depreciation divides the asset cost by useful life: $200,000 ÷ 5 years = $40,000 per year.

Question 3

In software project financial management, the term 'contingency reserve' refers to:

Accepted Answer

Budget allocated to handle known-unknown risks identified during planning

Answer

Contingency reserves cover identified risks with quantified probability and impact, distinguishing them from management reserves which cover unknown risks.

Question 4

A software organization compares the discounted cash inflows to the initial investment of a project. When the NPV equals zero, the discount rate used is called the:

Accepted Answer

Internal Rate of Return (IRR)

Answer

The IRR is the discount rate that makes the NPV of all cash flows equal to zero, representing the project's expected rate of return.

Question 5

Which cost classification would software license renewal fees MOST likely fall under in a project budget?

Accepted Answer

Operating expenditure (OpEx)

Answer

Recurring license renewal fees are operating expenditures because they are ongoing costs of running the business rather than investments in long-term assets.

(CSM) Certified Software Manager Practice Test

(CSM) Certified Software Manager Practice Test

CSM Financial Management & Budgeting 3