XYZ Bakery's general manager was puzzled by the results of the income statement for the month which showed a net loss for the bakery. The owner is puzzled because of the volume of customers who flood the bakery each day for baked goods. The owner calculated the cost of direct materials and direct labor and was sure the prices were set right and overhead was estimated based on prior year expenses. 

1. How is it possible that volumes could be high but the store could lose money? 
2. 
   
3. What are other factors the owner should consider to make sure next year's financial statements report net income?

Answer rating: 100% (QA)

It is possible for a business like XYZ Bakery to have high customer volume but still experience a net loss due to various factors affecting its profit... View the full answer