Facility Financial Management 1 Flashcards
6 cards from real FMP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Facility Financial Management 1 flashcards as text
A facility manager is comparing two HVAC replacement options: Option A costs $80,000 upfront with low maintenance costs, and Option B costs $50,000 upfront with higher ongoing maintenance. Which financial tool is most appropriate for selecting between them?
Answer: Life cycle cost analysis
Life cycle cost analysis accounts for all costs over the asset's entire lifespan — initial purchase, operation, maintenance, and disposal — making it the appropriate tool when upfront costs and ongoing costs differ significantly between options.
Which budgeting approach requires facility managers to justify every expense from zero each budget cycle rather than basing requests on prior-year spending?
Answer: Zero-based budgeting
Zero-based budgeting starts from a 'zero base' each period, requiring managers to justify all expenditures anew rather than simply adjusting prior-year figures, which eliminates automatic baseline increases.
When a facility's actual maintenance spending exceeds the approved budget by 12%, what is the most appropriate immediate management action?
Answer: Conduct a variance analysis to identify the root cause of the overage
Variance analysis identifies whether the overage stems from scope changes, price increases, inefficiencies, or forecasting errors, giving management the information needed to respond appropriately rather than reacting blindly.
What does a chargeback system accomplish in a multi-tenant or corporate facility environment?
Answer: It allocates facility costs to the departments or tenants that consume the services
A chargeback system assigns facility costs — such as utilities, cleaning, or maintenance — directly to the business units or tenants that generate them, promoting accountability and accurate cost visibility across the organization.
A facility manager proposes replacing aging lighting with LED fixtures at a cost of $120,000, projecting annual energy savings of $30,000. What is the simple payback period for this investment?
Answer: 4 years
Simple payback period = Initial cost ÷ Annual savings = $120,000 ÷ $30,000 = 4 years. This metric tells management how long until the investment recoups its upfront cost through ongoing savings.
Which financial metric expresses the ratio of net benefit gained from a facility investment relative to its total cost, and is commonly used to rank competing capital projects?
Answer: Return on investment (ROI)
Return on investment (ROI) = (Net Benefit ÷ Total Cost) × 100, expressing profitability as a percentage. It allows facility managers to compare projects of different sizes and types on a common scale to prioritize capital spending.