2. If the cost of sales is higher than the revenue generated then however high the sales volumes are, there will be a net loss incurred by the bakery and this is the case that has taken place for the bakery during the current months. And there are high possibilities that could result in the bakery having a net loss for the month.

the fixed costs might not have been considered while calculating the price of the products to be sold in the bakery which could've also led to the net loss in the morning for the bakery.

The cost of sales for the current month has not been properly considered and unknowingly for every additional sale in the bakery, it has lost money due to the cost of sales being more than the revenue generated per unit itself indicating a negative margin being fixed unknowingly.

Please write a response to these two responses! Please also number them! 1. It is possible that volumes could be high but the store could lose money because the owner calculated the cost of the production by using previous year overhead rates. The actual overhead expenses might have increased when compared to the previous year, which leads to the net loss in the Income Statement. One factor to be considered by the owner to make sure that the next year he earns profit is calculation os estimated overhead expenses for the year in advance and decide the overhead rate ad cost per period. Another factor to consider is a timely analysis of the variances of expenses and revise the prices to cover the variances.