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

4 months ago

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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Celeste

3 months ago

I think we can all agree that raw material cost is the best example of a variable cost.

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Alfreda

3 months ago

Yeah, that makes sense. It's a clear example of a variable cost.

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Amber

4 months ago

I agree, the cost of raw material definitely varies with the level of output.

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Eve

4 months 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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Ty

3 months 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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Corinne

3 months ago

D) Property taxes.

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Tracie

3 months ago

C) Interest charges.

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Rasheeda

3 months ago

B) Cost of raw material.

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Blythe

3 months ago

A) The corporate president's salary.

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Carin

3 months ago

German: So, we all agree that B) Cost of raw material is the best example of a variable cost.

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Apolonia

3 months ago

User 3: Definitely, raw material costs fluctuate depending on production needs.

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German

3 months ago

User 2: I think raw material costs are a better example of a variable cost.

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Kimberlie

4 months ago

User 1: I agree, the president's salary doesn't change based on production levels.

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Denise

4 months 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

5 months ago

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

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Nana

5 months ago

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

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Raymon

5 months 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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