If you want to upcycle some thrift store finds into a tunic start with sweater and shirt that will be too big for you. Sometime I use men's sweaters and shirts and sometimes I find a L or XL women's sweater, dress or shirt. The point is that the garments you choose should be too big for you since you will be using them as a tunic and will be modifying them. In this case the sweater was a man's XL and the shirt was a Large. I always try on the sweater to see how long it is on me. Then I know how much fabric that I want to add to the bottom of the sweater. In this case I wanted this to be a little longer so that I could wear it as a tunic with leggings or a dress with tights.
Always fuse knit interfacing to the back of the sweater where you plan to cut into the sweater. For example, most of the time you will want to cut off the band at the bottom so you would apply fusible interfacing where you will be cutting. Also if you plan to change the neckline then fuse interfacing to the top part of the sweater.
In the past I have always left the sweater sleeves long, but this time I cut them off and hemmed them to make a modified "vest". To add interest to the sweater and to make them look more like one garment then take elements, such as the pockets, cuffs, buttons, and fabric from the shirt to add to the sweater. As you can see I used my serger to make strips of shirt fabric that I used for trim around the bottom and neckline. I also used the collar band as a decorative stripe down the front of the sweater. Number one rule...cut off each piece of sweater and shirt as if it could be used because many times that's exactly what you end up doing.
In the past I have always left the sweater sleeves long, but this time I cut them off and hemmed them to make a modified "vest". To add interest to the sweater and to make them look more like one garment then take elements, such as the pockets, cuffs, buttons, and fabric from the shirt to add to the sweater. As you can see I used my serger to make strips of shirt fabric that I used for trim around the bottom and neckline. I also used the collar band as a decorative stripe down the front of the sweater. Number one rule...cut off each piece of sweater and shirt as if it could be used because many times that's exactly what you end up doing. 
I used my ruffler attachment to make a pleated strip to put around the neckline.
I like a stand up collar, so I move the tiny buttons up to the collar stand that makes a new collar.
