CEM Equipment Acquisition & Disposal 2 — Questions and Answers
Question 1: When evaluating a lease vs. purchase decision for exhibition AV equipment, which financial metric best accounts for the time value of money?
- Payback period
- Net present value (NPV) (Correct answer)
- Gross margin ratio
- Break-even analysis
Correct answer: Net present value (NPV)
NPV discounts future cash flows to present value, making it the most accurate tool for comparing lease vs. purchase costs over time.
Question 2: A venue needs to dispose of aging rigging equipment. Which action should be taken FIRST before disposal?
- List it on an online auction site
- Conduct a safety inspection and document the equipment's condition (Correct answer)
- Contact a scrap metal dealer for pricing
- Notify the local fire marshal
Correct answer: Conduct a safety inspection and document the equipment's condition
Documenting condition through a safety inspection protects the organization from liability and ensures proper disposal pathways are selected.
Question 3: Which depreciation method results in the highest expense in the early years of an asset's life?
- Straight-line depreciation
- Units-of-production depreciation
- Double declining balance depreciation (Correct answer)
- Sum-of-years-digits depreciation
Correct answer: Double declining balance depreciation
Double declining balance applies twice the straight-line rate to the book value each year, front-loading depreciation expenses.
Question 4: An exhibition manager is acquiring custom-branded booth furniture. Which procurement approach offers the most price leverage?
- Emergency purchasing
- Single-source procurement
- Competitive bidding with at least three vendors (Correct answer)
- Sole-source procurement
Correct answer: Competitive bidding with at least three vendors
Soliciting bids from multiple vendors creates competition that typically drives down pricing and improves terms.
Question 5: Which document establishes the specific technical requirements equipment must meet before a purchase order is issued?
- Bill of lading
- Certificate of insurance
- Request for Proposal (RFP)
- Equipment specification sheet (Correct answer)
Correct answer: Equipment specification sheet
An equipment specification sheet details exact performance, dimensional, and compliance standards the purchased equipment must satisfy.
Question 6: When donating used exhibition equipment to a non-profit, what document is required for the organization to claim a tax deduction?
- Bill of sale
- Qualified appraisal for items over $5,000 (Correct answer)
- Manufacturer's warranty
- Depreciation schedule
Correct answer: Qualified appraisal for items over $5,000
IRS rules require a qualified appraisal from a certified appraiser for non-cash charitable donations exceeding $5,000.
Question 7: A trade show organizer is acquiring portable flooring for 50 events per year. Which total cost of ownership (TCO) factor is most often overlooked?
- Purchase price
- Shipping and storage costs over the asset's lifespan (Correct answer)
- Vendor invoice date
- Color and branding options
Correct answer: Shipping and storage costs over the asset's lifespan
Recurring logistics costs—shipping, warehousing, and handling—often exceed the initial purchase price over a high-use flooring asset's life.
CEM Equipment Acquisition & Disposal 2
When evaluating a lease vs. purchase decision for exhibition AV equipment, which financial metric best accounts for the time value of money?