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LO 2.1Identify the three primary classifications of businesses and explain the differences among the three.


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


LO 2.1Walsh & Coggins, a professional accounting firm, collects cost information about the services they provide to their clients. Describe the types of cost data they would collect and explain the importance of analyzing this cost data.


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 2.2Identify and describe the three types of product costs in a manufacturing firm.


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


LO 2.2Explain the concept of relevant range and how it affects total fixed costs.


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


LO 2.2Explain the difference between prime costs and conversion costs.


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


LO 2.3Explain the components of the total cost equation and describe how each of the components can be used by management for decision-making.


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?

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