Samuel Miliken's company has reported losses from operations for several years. Industry standards indicate that prices are normally set at 30 percent above manufacturing cost, which is where Miliken has set them. Assuming that his other costs are aligned with industry norms and the company uses a process cost system, how could Miliken continue to lose money while his competitors earn a profit? Answer the following two questions:

1.) Is the problem in the costs to make the product (costs above the gross profit line on the income statement) or in the operating expenses that are below the gross profit line on the income statement. In either case, please identify the biggest culprits and justify why each should receive further analysis (be very complete in your identification and justification).

2.) Could the net income losses be eliminated by just raising the selling price of the products being sold? Please explain why or why not.