Economics · Cost Accounting

Consider the core principles and evaluation of Marginal Costing and Absorption Costing theory. Which of the following combinations correctly identifies the valid and invalid points? Statement 1: The Marginal Costing technique assumes that all costs can be cleanly bifurcated into fixed and variable components. Statement 2: In a period of high inflation, marginal costing focuses on current variable costs rather than historical fixed cost allocations. Statement 3: The Break-Even Point in units will decrease if there is an increase in the unit selling price, assuming others remain constant. Statement 4: Marginal costing is often criticized for its short-term focus, which may lead to accepting orders that do not cover total costs. Statement 5: The 'Margin of Safety' can be improved by increasing the PV ratio or by reducing fixed costs. Statement 6: For a multi-product company, the Break-Even Point is dependent on the specific sales mix. Statement 7: Absorption costing is inherently superior to marginal costing for selecting the most profitable product line because it accounts for full costs.