$19,375$ tons of Its granular. Because of this year's mild winter, projected demand for Its product is only $15,500$ tons. Based on projected

production and sales of $15,500$ tons, the company estimates the following income using absorption costing.

Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive

equipment.

Selling and administrative expenses consist of varlable selling and administrative expenses of $$6$ per ton and fixed selling and

administratlve expenses of $$217,000$ per year. The company's president will not earn a bonus unless a positive income is reported. The

controller mentions that because the company has large storage capacity, It can report a positive income by setting production at the

usual $19,375$ ton level even though It expects to sell only $15,500$ tons. The president is surprised that the company can report income

by producing more without Increasing sales.

Requlred:

Prepare an Income statement using absorption costing based on production of $19,375$ tons and sales of $15,500$ tons. Can the

company report a positive Income by Increasing production to $19,375$ tons and storing the $3,875$ tons of excess production in

Inventory?

By how much does Income increase by when producing $19,375$ tons and storing $3,875$ tons in Inventory compared to only

producing $15,500$ tons?

Complete this question by entering your answers in the tabs below.

Prepare an income statement using absorption costing based on production of $19,375$ tons and sales of $15,500$ tons. Can the

company report a positive income by increasing production to $19,375$ tons and storing the $3,875$ tons of excess production in

inventory?

Note: Round your answers to the nearest whole dollar.