Puppy Power Ltd produces 3 products as follows:

	A	B	C
Sale Revenue per unit	20	30	40
Variable costs per unit	10	10	15
Allocated Fixed costs per unit	15	15	5
Profit per unit	(5)	5	20

1. Explain the term 'cost behaviour'.

It represents the resources used to achieve benefit. It include fixed costs and variable cost.

1. The assistant accountant has suggested that the product 'A' line be closed. Give reasons for disagreeing or agreeing with them. (Financial and qualitative factors should be considered).
2. Explain how fixed overheads are allocated to products when calculating the full cost of a unit/job.
3. Discuss any problems that can arise with the allocation of fixed costs to units.
4. What is the difference in use between marginal costing and traditional absorption costing?