Economics · Marginal Costing

Consider the following statements: Statement 1: The application of marginal costing techniques in the banking industry is primarily seen in the pricing of various loan products and services, where the variable cost includes the cost of funds and transactional expenses, while the fixed cost includes branch rentals and staff salaries. Statement 2: A key assumption of the CVP analysis is that the sales mix remains constant in a multi-product firm, which means that the ratio of the different products sold does not change as the total volume of sales fluctuates over time. Statement 3: The shutdown point of a business is reached when the total revenue is exactly equal to the total variable costs, meaning the contribution is zero and any further operation would lead to a loss greater than the total fixed costs. Statement 4: In the context of decision-making, 'Relevant Costs' are future costs that differ between alternatives, and marginal costing identifies these by focusing on the variable costs and avoidable fixed costs associated with a particular choice. Statement 5: Under the New Tax Regime in India, the corporate tax rate for certain new domestic manufacturing companies is 15 percent, which significantly alters the post-tax break-even analysis for such entities compared to the older tax rates. Statement 6: The Angle of Incidence on a break-even chart is formed at the intersection of the total sales line and the total cost line, and a narrower angle indicates that the company is earning profits at a faster rate after reaching the break-even point. Statement 7: Marginal costing is often referred to as 'Variable Costing' or 'Out-of-Pocket Costing' because it emphasizes the cash-flow impact of production decisions by ignoring non-cash fixed expenses like depreciation. Identify which statement regarding the break-even chart is incorrect and which statement regarding shutdown points is correct.