Santos Company is considering introducing a new compact disc player at a price of $105 per unit. The controller has compiled the following incremental cost information based on an estimate of 120,000 units of sales annually for the new product.

Direct Materials - $3,600,000

Direct Labor Cost - $2,400,000

Variable manufacturing overhead - $1,200,000

Sales Commission - 10 Percent

Fixed Cost - $2,000,000

The sales manager also expects the existing model sales to drop from 300,000 to 240,000 units. The contribution margin for the existing model is $20.00 per unit.

Question 1) Find the contribution margin - would it be best to add the lump sum of all variable costs then subtract it from the total sum of revenues or would it be easier to determine the cost by each unit.

Question 2) How do I figure out the decrease in contribution margin from the existing product?

Thank you so much for your time.