CAM Financial and Asset Management 3 — Questions and Answers
Question 1: When calculating an aircraft's hourly maintenance reserve, which factor is MOST important to include?
- Projected costs of scheduled inspections and engine overhauls prorated per flight hour (Correct answer)
- The pilot's annual salary
- Monthly hangar rent
- The cost of catering supplies
Correct answer: Projected costs of scheduled inspections and engine overhauls prorated per flight hour
Maintenance reserves accrue funds per flight hour for future scheduled events like inspections and overhauls.
Question 2: A company is evaluating a $10 million aircraft purchase using discounted cash flow analysis. What does a positive net present value (NPV) indicate?
- The projected benefits exceed the costs when adjusted for the time value of money (Correct answer)
- The aircraft will never require maintenance
- The purchase price is below market value
- The company will avoid all depreciation expense
Correct answer: The projected benefits exceed the costs when adjusted for the time value of money
A positive NPV means discounted future benefits outweigh discounted costs, supporting the investment.
Question 3: Which depreciation method allows the largest deductions in the early years of an aircraft's tax life under the U.S. tax code?
- Accelerated depreciation such as MACRS (Correct answer)
- Straight-line depreciation
- Units-of-production depreciation
- Sinking fund depreciation
Correct answer: Accelerated depreciation such as MACRS
MACRS front-loads depreciation deductions, giving larger tax benefits in the early years of ownership.
Question 4: An aviation manager tracks the market value of the department's aircraft annually. Which factor typically has the GREATEST negative effect on resale value?
- High airframe total time and engines near overhaul (Correct answer)
- Fresh paint and interior refurbishment
- Complete and well-organized maintenance records
- Enrollment in an engine maintenance program
Correct answer: High airframe total time and engines near overhaul
High total time combined with engines approaching costly overhauls significantly depresses aircraft resale value.
Question 5: What is the primary purpose of a fixed-versus-variable cost breakdown in flight department financial reporting?
- It shows how total costs change with utilization, supporting accurate trip costing and fleet decisions (Correct answer)
- It determines pilot duty time limits
- It sets the aircraft's insured hull value
- It establishes FAA airworthiness compliance
Correct answer: It shows how total costs change with utilization, supporting accurate trip costing and fleet decisions
Separating fixed from variable costs reveals cost behavior with flight activity, enabling accurate per-trip and utilization analysis.
Question 6: A flight department charges internal business units for aircraft use. What is this practice called?
- Chargeback or cost allocation (Correct answer)
- Wet leasing
- Interchange agreement
- Time sharing under Part 91.501
Correct answer: Chargeback or cost allocation
Chargeback systems allocate flight department costs to the internal business units that use the aircraft.
Question 7: Which insurance coverage protects the company against loss or damage to the aircraft itself?
- Hull insurance (Correct answer)
- Liability insurance
- Workers' compensation
- Business interruption insurance
Correct answer: Hull insurance
Hull insurance covers physical damage to or loss of the aircraft, while liability covers third-party claims.
CAM Financial and Asset Management 3
When calculating an aircraft's hourly maintenance reserve, which factor is MOST important to include?