Question 5 (adapted from Jan 2021 Question 1) Paper Specialist Ltd, a small and medium enterprise, specialises in paper products which are being categorised into three major groups: Wet Wipes, Tissues and Diapers. The market for Wet Wipes is expected to expand in the future but Paper Specialist Ltd is currently struggling to maintain its market share due to the intense price competition in the industry. The market for Diapers is assessed to be least price-sensitive among all products. The company currently uses the step-donor method to allocate its Material Handling (MI-I) and Quality Assurance (QA) costs to the three product groups, and prices all products using a cost-plus basis. The cost of MH and QA before allocation were $5,200,000 and $3 ,030,000, respectively. The costs following the allocation are as shown below: _ep-Down Method S Cost before allocation $2,700,000 $6,450,000 $4,825,000 Allocate Material Handling: $1,368,000 $2,280,000 $912,000 $661200 $334,800 $1=668~000 $4,735,200 $10,564,300 $1,455,000 Page 4 of 5 Due to the increased intensity of competition, the company is contemplating the activity-based costing method to help understand and control its costs better. The following are the costing and operating details collected for the pilot testing purpose. _ _ m son Required: Compute the activity-based cost allocated to all products. Would you recommend for the change to ABC? Explain