FMP - Facility Management Professional Facility Financial Management Questions and Answers

Question 1

A facility manager is preparing the annual budget and needs to justify every expense from scratch, without reference to previous budgets. This approach is intended to eliminate outdated or inefficient spending. Which budgeting method is being used?

Accepted Answer

Zero-Based Budgeting

Answer

Zero-Based Budgeting (ZBB) is a method that requires managers to justify every budget line item from a 'zero base,' without reference to previous spending levels. This approach forces a fresh evaluation of all expenses for each new budget cycle.

Question 2

When evaluating two different HVAC systems for a new building, a facility manager calculates the total cost of each system over its entire lifespan, including acquisition, installation, energy consumption, maintenance, and disposal. What is this financial analysis method called?

Accepted Answer

Life Cycle Cost Analysis (LCCA)

Answer

Life Cycle Cost Analysis (LCCA) is a method for assessing the total cost of facility ownership. It considers all costs of acquiring, owning, operating, maintaining, and disposing of a building or building system. This is the most comprehensive method for comparing alternatives with different initial and future costs.

Question 3

A facility manager implements a system to track the utility consumption of each department and provides them with detailed reports showing their associated costs. However, the departments are not financially billed for their usage; the costs remain within the facility's central budget. What is this cost allocation practice known as?

Accepted Answer

Showback

Answer

Showback is a cost allocation method where departments are shown the costs of the services they consume, but the funds are not actually transferred from their budgets. The primary goal is to increase awareness and encourage more responsible use of resources without direct financial penalty.

Question 4

At the end of the second quarter, a facility manager compares the actual maintenance expenditures of $150,000 against the budgeted amount of $120,000. This process of comparing actual financial results to the budget is known as:

Accepted Answer

Variance Analysis

Answer

Budget variance analysis is the process of comparing actual financial results against the budgeted amounts for a given period to identify and understand discrepancies. In this scenario, there is an unfavorable variance of $30,000, which requires investigation.

Question 5

Which of the following financial reports provides a snapshot of the facility department's assets, liabilities, and equity at a single point in time?

Accepted Answer

Balance Sheet

Answer

The balance sheet provides a snapshot of a company's financial position at a specific point in time, detailing assets, liabilities, and equity. The P&L statement shows performance over a period, the cash flow statement tracks cash movements, and a job costing report details expenses for a specific project.

(FMP) Facility Management Professional Practice Test

(FMP) Facility Management Professional Practice Test

FMP - Facility Management Professional Facility Financial Management Questions and Answers