Chapter 3: Financial Management & Cost Control Flashcards
1
Q
What is a budget?
A
- planned forecast of future income and expenditure
- which is usually made annually
- but can be projected for any given period
2
Q
Types of budgets
A
- administrative budget
- operational budget
- capital budget
3
Q
What is administrative budget?
A
- those items of overhead that a department shares with other departments in the organization
- controls not only the funds for personnel but also numbers of positions
- make hiring greater number of lower ranking employees difficult
- not fungible
4
Q
what does fungible mean?
A
- can be replaced
5
Q
Operational budget
A
- covers funds that company gives to facility manager to perform their mission
- level of detail is a matter of choice, depending on management information needs
6
Q
What is capital budget?
A
- provides information on major buildings, furniture, furnishings, and equipment
- that the organisation needs to perform its mission
- used to solve major long-term construction and replacement requirements uncovered in strategic planning
7
Q
4 main subheads of annual expenditure
A
- building, fixtures, and furnitures
- mechanical, tools & plant
- electrical
- renewals
7
Q
points to consider when preparing maintenance budgets
A
- Must have a clear understanding of the overall objectives and their priorities.
- Must complete a systematic analysis of the needs and demands stemming from the objectives.
- Must be able to balance demands within the known constraints of labour, materials, managerial skills and funds.
- Avoid the waste of financial resources.
8
Q
Try to develop a budget system so that:
A
- adequate measurement can be obtained
- sets work standards
- performance deviations can be easily seen
- identify future opportunities
9
Q
Budgetary control
A
- check difference between budget and actual costs
- weekly or monthly basis
- difference analyzed and corrective actions taken
- overrun of budget - various factors
10
Q
reasons for budget overrun
A
- tender in excess of the estimates
- increase in scope of work due
- inefficient organization and planning of work
11
Q
why tenders in excess in estimates happen?
A
- Inaccurate estimates
- Unforeseen increases in wage rates or material prices
- Changes in market conditions affecting tender climate
- Delay in starting the work resulting in tenders being invited at an unfavourable time
12
Q
Increase in scope of work due to
A
- Variations during execution period
- Higher proportion of user requests than anticipated
- Abnormal user
- Exceptional weather conditions
13
Q
Inefficient organization and planning of work resulting in
A
- Higher proportion of non-productive time
- Lower output during productive time
- Material wastage
14
Q
revise planning
A
- revise budget to keep up with progress of programs
- work may be ahead or behind time
- cost may be lower or higher
- unplanned or unforseen works
