CAFM Asset Management 2 — Questions and Answers
Question 1: Which depreciation method allocates an equal amount of cost each year over the asset's useful life?
- Declining balance
- Straight-line (Correct answer)
- Units of production
- Sum-of-years-digits
Correct answer: Straight-line
Straight-line depreciation divides the asset's depreciable cost evenly across each year of its useful life.
Question 2: A fleet manager wants to compare the total cost of owning a vehicle versus leasing it. Which metric is most appropriate?
- Residual value only
- Monthly payment amount
- Total cost of ownership (TCO) (Correct answer)
- Invoice price
Correct answer: Total cost of ownership (TCO)
TCO accounts for acquisition, fuel, maintenance, insurance, and disposal costs, enabling a fair buy-vs-lease comparison.
Question 3: What is the term for the scheduled replacement of fleet vehicles based on predetermined criteria such as age or mileage?
- Asset liquidation
- Fleet cycling (Correct answer)
- Capital rationing
- Remarketing
Correct answer: Fleet cycling
Fleet cycling refers to systematically replacing vehicles when they reach defined age, mileage, or cost thresholds.
Question 4: An organization chooses not to capitalize a vehicle purchase and instead expenses it immediately. This decision is most influenced by:
- The vehicle's fuel economy rating
- The company's capitalization threshold policy (Correct answer)
- The driver's assignment location
- The color and trim level chosen
Correct answer: The company's capitalization threshold policy
Capitalization threshold policies define the minimum dollar amount that must be treated as a capital asset rather than an expense.
Question 5: Which of the following best describes 'residual value' in fleet asset management?
- The purchase price minus dealer discounts
- The estimated market value of a vehicle at the end of a lease or ownership period (Correct answer)
- The cost of all scheduled maintenance performed
- The annual registration fee paid by the fleet
Correct answer: The estimated market value of a vehicle at the end of a lease or ownership period
Residual value is the projected worth of the vehicle at disposition, which directly affects lease payments and replacement timing decisions.
Question 6: A fleet manager reviews vehicles with high maintenance costs but low mileage. The BEST course of action is to:
- Increase mileage limits for those vehicles
- Evaluate early replacement or remarketing (Correct answer)
- Change the assigned driver
- Switch to a different fuel type
Correct answer: Evaluate early replacement or remarketing
High maintenance costs relative to utilization signal poor economic return, making early disposal or remarketing the prudent financial decision.
Question 7: Which document formally records the assignment of a fleet vehicle to a specific driver or department?
- Bill of lading
- Vehicle assignment agreement (Correct answer)
- Certificate of origin
- Title application
Correct answer: Vehicle assignment agreement
A vehicle assignment agreement documents responsibility, personal-use rules, and accountability for a specific vehicle-driver or vehicle-department pairing.
CAFM Asset Management 2
Which depreciation method allocates an equal amount of cost each year over the asset's useful life?