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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 Tollowing details for 2016 the 2016 operating income. (Click the icon to view the activity and cost pool detais ) (Click the On to (Click the icon to view additional information ) i Requirement Read the Leuiemen First The seling More Info It all other costs and cost-dnver intormation remain the same, by how much must Gallant reduce its total cost and cost per unit it it is to carm the same target operating income in 2017 as it camed in 2016 (and thereby carn its requirod rate of return on investment)? For 2016, Galant buys 250,000 pencil packs at an average cost of S3 per pack and sells them to retailers at an average pce ot $ per pack Assume Galant has no txed costs and no inventories For 2017, retailers are demanding a 6% discount ott 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 Total Per Unit Data Print Done Reverues 1,50,000 S 7 00 Costs Purchase cost of pencils Ordering costs Receiving and storage Shipping 750,000 80,000 00,000 105,000 1,235,000 3.00 0.32 1 20 0.42 4.94 7 06 Quantity of Cost per Unit Activity 1. Placing and paying for orders of pencil packs 2. Receiving and storage 3. Shipping of pencil packs lo relailers Cost Driver Cost Driver of Cost Driver Number of orders Loads moved Number of shipments 800 $100 per crder 360 per load 1,500 ST0 per shiprmen 5,000 Total costs $515,000 S Operating income Print Done Print Done Check Answer O Type here to search

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