Question

Lizzy's is a retail clothing store, specializing in formal wear for weddings. They purchase their clothing for resale from their 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?

Answer 1

Owners of Lizzy need to analyze the following points before expanding their business;

1. They need to assess whether expansion will lead to increase in any Fixed Cost or would it will remain the same post expansion.

2. They need to analyze the Cost of Incorporation of new business line.

3. Owners need to analyze the Variable Cost of each unit and compare it with the selling price of each unit then analyze the potential profit figures.

4. Lizzy owners need to analyze the Promotional Cost of new business lines by way of advertisements or pamphlets or newspapers headlines etc.

5. Lizzy owners need to analyze whether they do have sufficient funds for bearing the cost or they will have to take loans then they will emerge Financial Cost