Chapter 13 Revenue Sources from Real Estate Investment Flashcards
What are some of the benefits of a chargeback system?
cost awareness
eliminating the cookie jar mentality
In what way do some facility managers cover the cost of major replacement or renovations?
By factoring in a “rainy day” cost to the chargeback program.
Define life cycle costing.
Life cycle costing is the application of systems analysis to compare alternative capital expenditures that are expected to produce benefits over period of time greater thane one year.
What are the benefits of chargeback system?
Improved awareness by user departments
Fewer service requests
Perception of facilities staff as service providers
What is the final step in the life cycle costing calculation?
To add the initial, on-going, and one-time future expenses to calculate the present value. Divide the present value by the life expectancy.
What is a spreadsheet program used for in a life cycle costing analysis?
It is used to see the effect of small changes in the assumptions made.
In a life cycle coting analysis, the effect of slight changes in loan rates or other variables can easily be checked with a:
a. professional consultant
b. manufacturer’s representative
c. set of computation tables
d. spreadsheet program
d. spreadsheet program
What is the historical real interest rate used in life cycle costing, and when is it appropriate to set it higher?
The historical rate is 3%, and it is appropriate to set it higher wit high risk projects or when the cost of borrowing is high.
Worn-out equipment indicates a requirement for:
a. repair and maintenance
b. capital expenditure
c. foreclosure
d. personnel training
b. capital expenditure
What are some examples of one-time costs in rental space?
moving
furniture rearrangement
space redesign
above building standards alterations to prepare the space for occupancy
extra design services for above-standard alterations
master planning, master space programming
environmental studies
improvements that add new capability and net asset value to the building
What are some of the impediments to implementing chargeback system?
Facilities are often set up as an overhead cost center and costs are not allocated to users in most corporations. Moving to a fee for services requires changing corporate attitudes about facilities at every level.
In chargeback systems, perceptions of unfairness and lack of cooperation by users can be avoided if the facility manager:
a. lowers operating costs
b. hires more facilities staff
c. charges all users equally
d. promotes consumer education
d. promotes consumer education
What are capital expenditures and the general reasons for making them?
Capital expenditures are costs incurred by acquiring or upgrading an asset that produces revenue. Reasons for making them include change in volume of production, change to a new plant site, damage to equipment from outside causes, expansion, inadequacy of present production equipment, obsolescence, wear, worker skill and learning time, working conditions and morale, and environmental stewardship.
What is a critical element of life cycle costing?
The application of the principles of present value analysis. Present value is a concept based on the time value of money-the idea that money today is more valuable than money received in the future.
Costs associated with rearranging facilities to support a change in the basic operation of the user department are charged back as:
a. operating costs
b. ongoing services
c. one-time costs
d. ancillary services
c. one-time costs