Cost Estimation & Budgeting Flashcards

Which financial document provides the best snapshot of a forklift fleet's current book value for insurance and replacement planning?

Answer: Fixed asset register (asset ledger)

The fixed asset register tracks each forklift's purchase date, cost, accumulated depreciation, and current book value — essential for insurance and replacement decisions.

What is the main financial risk of setting forklift replacement cycles based solely on age rather than actual condition and operating hours?

Answer: Over-investment in replacements for units that still have productive life remaining

Age-only replacement policies may retire forklifts that are mechanically sound, wasting residual value and inflating capital expenditure unnecessarily.

When budgeting for a forklift fleet, what is the purpose of establishing a sinking fund?

Answer: To accumulate capital over time for planned equipment replacement

A sinking fund sets aside money periodically so that when replacement is needed, the capital is available without requiring large unplanned expenditures or debt financing.

A forklift has a salvage value of $4,000 after 10 years and was purchased for $44,000. Using straight-line depreciation, what is the annual depreciation expense?

Answer: $4,000

($44,000 − $4,000) ÷ 10 years = $40,000 ÷ 10 = $4,000 per year straight-line depreciation.

Which cost is NOT typically included when calculating the total cost of a forklift accident for safety ROI purposes?

Answer: Competitor's insurance premiums

Competitor insurance premiums are entirely external and have no bearing on your facility's accident cost calculation or safety ROI analysis.

A fleet manager receives three service bids: Vendor A $18,500/year full-service, Vendor B $12,000/year parts-only, Vendor C $15,000/year labor-only. If internal labor for Vendor B averages $7,200/year and parts for Vendor C average $5,500/year, which option has the lowest total annual cost?

Answer: Vendor A at $18,500

Vendor A: $18,500; Vendor B: $12,000 + $7,200 = $19,200; Vendor C: $15,000 + $5,500 = $20,500 — Vendor A's full-service contract is the lowest total cost.

Which practice helps a fleet manager identify underutilized forklifts that are inflating the cost-per-hour metric across the fleet?

Answer: Tracking actual operating hours per unit via telematics or hour meters

Telematics or hour-meter data reveals which units accumulate few operating hours, flagging candidates for redeployment, sale, or lease termination to cut fleet overhead.