CAFM Financial Management & Budgeting 3 — Questions and Answers
Question 1: A fleet manager wants to compare the true long-term cost of owning versus leasing 20 sedans. The BEST analytical tool is:
- Simple payback period
- Total cost of ownership (TCO) analysis (Correct answer)
- Break-even chart
- Gross margin calculation
Correct answer: Total cost of ownership (TCO) analysis
TCO analysis captures all acquisition, operating, maintenance, and disposal costs over the vehicle lifecycle, enabling a fair own-vs-lease comparison.
Question 2: Which depreciation method results in the HIGHEST expense in the first year of a vehicle's life?
- Straight-line depreciation
- Units-of-production depreciation
- Double-declining balance depreciation (Correct answer)
- Sum-of-the-years'-digits depreciation
Correct answer: Double-declining balance depreciation
Double-declining balance applies twice the straight-line rate to the book value, front-loading depreciation expense more than other methods.
Question 3: A favorable budget variance in fleet maintenance most likely indicates:
- Actual maintenance costs exceeded the budget
- Actual maintenance costs were lower than budgeted (Correct answer)
- The budget was set too high and vehicles are under-maintained
- Fuel prices dropped below forecast
Correct answer: Actual maintenance costs were lower than budgeted
A favorable variance means actual spending came in below the budgeted amount, though it should be investigated to confirm it reflects genuine savings, not deferred maintenance.
Question 4: What is the primary purpose of a fleet charge-back system?
- To penalize drivers for accidents
- To allocate fleet costs to the departments that use the vehicles (Correct answer)
- To reduce the total fleet size
- To track fuel card fraud
Correct answer: To allocate fleet costs to the departments that use the vehicles
Charge-back systems assign vehicle-related costs to the consuming business units, promoting accountability and more accurate departmental cost reporting.
Question 5: Which factor most directly increases a fleet vehicle's residual value at the end of its lifecycle?
- High mileage accumulation
- Consistent preventive maintenance records (Correct answer)
- Dark exterior paint colors
- Extended use beyond the replacement cycle
Correct answer: Consistent preventive maintenance records
Complete and consistent maintenance records demonstrate vehicle health to buyers, commanding higher resale prices at disposal.
Question 6: A fleet manager negotiates a full-service maintenance contract. This arrangement shifts which type of risk to the vendor?
- Fuel price risk
- Maintenance cost variability risk (Correct answer)
- Driver accident risk
- Insurance liability risk
Correct answer: Maintenance cost variability risk
Full-service contracts transfer unpredictable maintenance cost swings to the vendor in exchange for a fixed periodic fee.
Question 7: When calculating fleet budget variance percentage, the correct formula is:
- (Actual − Budget) ÷ Actual × 100
- (Budget − Actual) ÷ Budget × 100 (Correct answer)
- (Actual + Budget) ÷ 2 × 100
- (Actual − Budget) ÷ Prior Year × 100
Correct answer: (Budget − Actual) ÷ Budget × 100
Variance percentage is calculated as the difference between budget and actual divided by the original budget, expressing deviation as a share of plan.
CAFM Financial Management & Budgeting 3
A fleet manager wants to compare the true long-term cost of owning versus leasing 20 sedans.
The BEST analytical tool is: