IMANET Exam CMA Topic 3 Question 66 Discussion

Actual exam question for IMANET's CMA exam

Question #: 66
Topic #: 3

[All CMA Questions]

Which of the following is the best example of a variable cost?

AThe corporate president's salary.

BCost of raw material.

CInterest charges.

DProperty taxes.

Show Suggested Answer

Suggested Answer: B

The net initial investment for a capital project consists of three components: the purchase of new equipment, the increase in working capital, and the after-tax proceeds from the disposal of old equipment For this company, the first of these is $54,000 ($50,000 + $4,000), and the second is $1,000. The calculation of the after-tax proceeds from the disposal of the old equipment is as follows:

by Gertude at Feb 26, 2023, 09:04 AM

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Jordan

Let's see, variable costs are those that vary with the level of output. I'd say B) Cost of raw material is the most fitting example here. Not a hard question, really.

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Eve

20 hours ago

Hmm, the president's salary as a variable cost? That's like saying the CEO has to take a pay cut every time production goes down. I'll go with B.

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Denise

2 days ago

B) Cost of raw material is the correct answer. Variable costs change depending on the output, while fixed costs like interest charges and property taxes remain the same.

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Ronald

11 days ago

But what about A) The corporate president's salary? It can also change based on performance.

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Nana

12 days ago

I agree with Floyd, raw material cost can vary based on production levels.

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Raymon

15 days ago

The cost of raw material is definitely the best example of a variable cost. It fluctuates with the level of production, unlike the president's salary or property taxes.

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Floyd

25 days ago

B) Cost of raw material is the best example of a variable cost.

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