CAFM Financial Management 5 — Questions and Answers
Question 1: Which metric is most useful for benchmarking a fleet's financial performance against industry peers?
- Total annual fuel spend
- Cost per mile by vehicle category (Correct answer)
- Number of vehicles in the fleet
- Average vehicle age in months
Correct answer: Cost per mile by vehicle category
Cost per mile normalized by vehicle category allows apples-to-apples comparison across fleets of different sizes and compositions.
Question 2: A fleet manager is deciding between in-house fueling infrastructure and retail fuel cards. Which financial factor most strongly favors in-house fueling?
- Lower upfront capital cost
- Higher fuel price discounts and elimination of retail markup on high-volume consumption (Correct answer)
- Reduced need for fuel management software
- Simpler tax reporting requirements
Correct answer: Higher fuel price discounts and elimination of retail markup on high-volume consumption
High-volume, centralized fueling eliminates retail markup and achieves bulk pricing that outweighs the capital investment for fleets with sufficient volume.
Question 3: Under GASB 34 guidelines applicable to government fleets, how must fleet assets be reported?
- Expensed fully in the year of acquisition
- Capitalized and depreciated over their useful lives on the government's financial statements (Correct answer)
- Listed only in supplementary notes without depreciation
- Reported at replacement cost annually
Correct answer: Capitalized and depreciated over their useful lives on the government's financial statements
GASB 34 requires government entities to capitalize infrastructure and fleet assets and report depreciation, reflecting the true cost of service delivery.
Question 4: What is the effect of a higher residual value assumption on a closed-end vehicle lease payment?
- Increases the monthly lease payment
- Decreases the monthly lease payment (Correct answer)
- Has no effect on the monthly payment
- Increases the money factor
Correct answer: Decreases the monthly lease payment
A higher residual value reduces the depreciation component (the amount being financed over the lease term), thereby lowering monthly payments.
Question 5: Which cost category should be excluded when calculating the variable cost per mile for fleet reporting purposes?
- Fuel costs
- Tire costs
- Vehicle depreciation (Correct answer)
- Maintenance labor
Correct answer: Vehicle depreciation
Depreciation is a fixed or scheduled cost unrelated to miles driven in any given period and should be reported separately from true variable operating costs.
Question 6: A fleet manager presents a business case for a telematics investment of $150,000. The system is projected to save $60,000 per year in fuel and maintenance. What is the simple payback period?
- 1.5 years
- 2.0 years
- 2.5 years (Correct answer)
- 3.0 years
Correct answer: 2.5 years
Simple payback period = $150,000 ÷ $60,000 = 2.5 years.
Question 7: Which of the following best describes 'fleet remarketing' as a financial strategy?
- Advertising the fleet's services to attract new customers
- Strategically timing and channeling the disposal of vehicles to maximize net residual proceeds (Correct answer)
- Renegotiating lease terms mid-cycle to reduce payments
- Transferring underutilized vehicles between departments
Correct answer: Strategically timing and channeling the disposal of vehicles to maximize net residual proceeds
Fleet remarketing focuses on maximizing resale revenue through optimal timing, condition management, and selection of the best disposal channel (auction, retail, trade-in).
CAFM Financial Management 5
Which metric is most useful for benchmarking a fleet's financial performance against industry peers?