1 Book Int ances Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 22,500 tons of its granular. Because of this year's mild winter, projected demand for its product is only 18,000 tons. Based on projected production and sales of 18,000 tons, the company estimates the following income using absorption costing Sales (18,000 tons at $120 per ton) Cost of goods sold (18,000 tons at $60 per ton) Gross profit Selling and administrative expenses Income $ 2,160,000 1,080,000 1,080,000 212,000 $ 868,000 Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive equipment Direct materials Direct labor. Variable overhead Fixed overhead ($720,000/18,000 tons) $ 13 per ton $ 4 per ton $3 per ton $40 per ton Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and administrative expenses of $320,000 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 22,500 ton level even though it expects to sell only 18,000 tons. The president is surprised that the company can report income by producing more without increasing sales. Required: 1. Prepare an income statement using absorption costing based on production of 22,500 tons and sale of 18,000 tons. Can the company report a positive income by increasing production to 22,500 tons and storing the 4,500 tons of excess production in inventory? 2. By how much does income increase by when producing 22,500 tons and storing 4,500 tons in inventory compared to only producing 18,000 tons? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prev 1 of 3 Next > ints 1 eBook Print ferences Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and administrative expenses of $320,000 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 22,500 ton level even though it expects to sell only 18,000 tons. The president is surprised that the company can report income by producing more without increasing sales. Required: 1. Prepare an income statement using absorption costing based on production of 22,500 tons and sales of 18,000 tons. Can the company report a positive income by increasing production to 22.500 tons and storing the 4,500 tons of excess production in Inventory? 2. By how much does income increase by when producing 22,500 tons and storing 4,500 tons in inventory compared to only producing 18,000 tons? Complete this question by entering your answers in the tabs below. Required 1 Required 2 By how much does income increase by when producing 22,500 tons and storing 4,500 tons in inventory compared to only producing 18,000 tons? Increase in income 5 oints 1 RIVERVI 2. By how much does income increase by when producing 22,500 tons and storing 4,500 tons in inventory compared to only producing 18,000 tons? Complete this question by entering your answers in the tabs below. Required 1 Required 2 eBook Print References Prepare an income statement using absorption costing based on production of 22,500 tons and sales of 18,000 tons. Can the company report a positive income by increasing production to 22,500 tons and storing the 4,500 tons of excess production in inventory? (Round your answers to the nearest whole dollar.) Sales BLAZER CHEMICAL Income Statement (Absorption Costing) Cost of goods sold Gross profit Selling general and administrative expenses Income $ Did the company report a positive income? Yes