Power-To-Spare, Inc. makes a smartphone case that includes a battery that extends the operating life of an iPhone. The manufacturing costs per unit include $15 direct materials, $17 direct labor, and $8 manufacturing overhead. These costs are based on a production and sales volume of 4,000 units. Advertising costs amounted to $25,000. Research and development cost for the materials used in the phone cases amounted $30,000. Companywide administrative costs amounted to $45,000. Fashion design costs amounted to $20,000. Power-To-Spares management team established the sales price at 150 percent of GAAP-defined product cost.

GAAP-Based income statement:

Particulars	Amount ($)
Sales Revenue (60 x 4000)	240000
Cost of goods sold (40 x 4000)	(160000)
Gross Profit	80000
General selling and administrative costs
Downstream costs (25000 + 45000)	(70000)
Upstream costs (30000 + 20000)	(50000)
Total general and administrative costs	(120000)
Net loss	$40000

QUESTION: Provide a possible explanation as to why the company incurred the loss shown on the income statement prepared to satisfy requirement E (GAAP-based income statement)? Hint: Calculate the full cost of making and selling the cases.