Lorenzo, the owner of a local poster shop, comes to you for help. While his shop has been breaking even for the past two years, it has not been able to generate a profit. For him to keep the shop open, he needs to earn at least $12,000 in operating income next year.

Review the contribution margin income statements for Lorenzo's shop and find the following:

1)Explain the benefits and advantages to the company for each scenario.

2)Explain the disadvantages to the company for each scenario

3)Determine which scenario is the best for Lorenzo's company.

4)Explain the potential effects of going from a salary to commission-based salesforce

5)Explain how a potential price increase might affect customers short and long term

Please note the blue boxes show the price increase of $9.25 and the green box shows the lower price.