LO 2.1Explain how the income statement of a manufacturing company differs from the income statement of a merchandising company.

LO 2.1Lizzy’s is a retail clothing store, specializing in formal wear for weddings. They purchase their clothing for resale from specialty distributors and manufacturers. Recently the owners of Lizzy’s have noted an increased interest in costume jewelry and fashion accessories among their clientele. If the owners of Lizzy’s decide to expand their business to include these products, what cost data would they need to collect and analyze prior to expanding the business?

LO 2.2Explain the difference between a period cost and a product cost.

LO 2.2Explain the differences among fixed costs, variable costs, and mixed costs.

LO 2.3Explain how a scatter graph is used to identify and measure cost behavior.

LO 2.3Explain how the high-low method is used for cost estimation. What, if any, are the limitations of this approach to cost estimation?