Gallant Inc. is a small distributor of mechanical pencils. Gallant identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for (Click the icon to view the activity and cost pool details.) (Click the icon to view the 2016 operating income.) (Click the icon to view additional information.) Required First determine the selling price to retailers in 2017. The selling price per pack to retailers in 2017 is $ 10.34 Now determine the purchase price per packs of pencils in 2017. The purchase price per pack in 2017 is $ 2.85 Activity and cost pool details X Activity Cost Driver 1. Placing and paying for orders of pencil packs Number of orders 2. Receiving and storage Loads moved 3. Shipping of pencil packs to retailers Number of shipments Quantity of Cost per Unit Cost Driver of Cost Driver 400 $100 per order 4,500 $60 per load 1,500 $60 per shipment 1 - X Operating income Total Per Unit 11.00 $ 2,750,000 $ Revenues 3.00 Costs: Purchase cost of pencils Ordering costs Receiving and storage Shipping 0.16 750,000 40,000 270,000 90,000 1.08 0.36 Total costs 1,150,000 4.60 $ 1,600,000 $ 6.40 Operating income Print Done - X Addtional information For 2016, Gallant buys 250,000 pencil packs at an average cost of $3 per pack and sells them to retailers at an average price of $11 per pack. Assume Gallant has no fixed costs and no inventories. For 2017, retailers are demanding a 6% discount off the 2016 price. Gallant's suppliers are only willing to give a 5% discount. Gallant expects to sell the same quantity of pencil packs in 2017 as it did in 2016. Print Done x Required - If all other costs and cost-driver information remain the same, by how much must Gallant reduce its total cost and cost per unit if it is to earn the same target operating income in 2017 as it earned in 2016 (and thereby earn its required rate of return on investment)? Print Done