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Presidential Corporation is a medium sized manufacturing company founded in 2012 to supply the Southern Caribbean with locally produced options. The Senior Accountant is preparing for a meeting with the executive leadership and has asked all management personnel to prepare reports and schedules based on their department and operational functions. The objective is to determine operational deficiencies and how they can reduce cost to meet customers' budget, while making a profit. Question 5 Part A Presidential produces two types of chargers, a portable model and a plug-in model. The following information is supplied by the company: The following additional information is also supplied: 1. Assembly is to be allocated on the basis of Machine Hours worked. 2. Purchasing is to be allocated on the basis of Labour Hours worked. 3. Inspection is to be allocated on the basis of Quality Control Inspection Hours. Required: a. Compute the pre-determined overhead rate for each cost pool. b. Compute the total manufacturing overhead cost for each Model. Part B In 2019 Presidential purchased a new machine for a cost of $400,000. The machine has a useful life of 5 years with no residual value. The machine is depreciated using the straight-line method and its annual operating costs are $110,000. In 2020 , the company is approached by another firm to purchase a more modern machine for $425,000 which has a life span of 4 years and will save $25,000 in operating costs. The new supplier will buy the existing machine from the Presidential for $300,000. Required: Using incremental analysis over the four-year period advise the Presidential whether it should replace the existing machine with the new one.

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