'In providing information to the product manager, the accountant must recognize that decision- making is essentially a process of choosing between competing alternatives, each with its own combination of income and costs; and that the relevant concepts to employ are future incre- mental costs and revenues and opportunity cost, not full cost which includes past or sunk costs.' (Sizer) Descriptive studies of pricing decisions taken in practice have, on the other hand, suggested that the inclusion of overhead and joint cost allocations in unit product costs is widespread in connection with the provision of information for this class of decision. Furthermore, these costs are essentially historic costs. You are required to:

(a) explain the reasoning underlying the above quotation; (10 marks)

(b) suggest reasons why overhead and joint cost allocation is nevertheless widely used in prac- tice in connection with information for pricing decisions; (10 marks)

(c) set out your own views as to the balance of these arguments. (5 marks)