Gonzalo Inc. is a small distributor of mechanical pencils. Gonzalo identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2016: Activity 1. Placing and paying for orders of pencil packs 2. Receiving and storage 3. Shipping of pencil packs to retailers Cost Driver Number of orders Loads moved Number of shipments Quantity of Cost Driver 500 4,000 1,500 Cost per Unit of Cost Driver $100 per order $60 per load $80 per shipment For 2016, Gonzalo buys 250,000 pencil packs at an average cost of $6 per pack and sells them to retailers at an average price of $8 per pack. Assume Gonzalo has no fixed costs and no inventories. For 2017, retailers are demanding a 5% discount off the 2016 price. Gonzalos suppliers are only willing to give a 4% discount. Gonzalo expects to sell the same quantity of pencil packs in 2017 as it did in 2016. Required If all other costs and cost-driver information remain the same, by how much must Gonzalo reduce its total cost and cost per unit if it is to earn the same target operat-ing income in 2017 as it earned in 2016 (and thereby earn its required rate of return on investment)?