Blazer Chemical produces and sells an ice$-$melting granular used on roadways and sidewalks in winter. It annually produces and sells $19,875$ tons of its granular. Because of this year$$s mild winter, projected demand for its product is only $15,900$ tons. Based on projected production and sales of $15,900$ tons, the company estimates the following income using absorption costing.

Sales $(15,900$ tons at $$92$ per ton$)$ $ $1,260,000$

Cost of goods sold $(15,900$ tons at $$60$ per ton$)954,000$

Gross profit $306,000$

Selling and administrative expenses $306,000$

Income $ $0$

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

Direct materials $ $13$ per ton

Direct labor $ $4$ per ton

Variable overhead $ $3$ per ton

Fixed overhead $($$$636,000/15,900$ tons$)$ $ $40$ per ton

Selling and administrative expenses consist of variable selling and administrative expenses of $$6$ per ton and fixed selling and administrative expenses of $$210,600$ 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 $19,875$ ton level even though it expects to sell only $15,900$ tons. The president is surprised that the company can report income by producing more without increasing sales.

Required:

Prepare an income statement using absorption costing based on production of $19,875$ tons and sales of $15,900$ tons. Can the company report a positive income by increasing production to $19,875$ tons and storing the $3,975$ tons of excess production in inventory?

By how much does income increase by when producing $19,875$ tons and storing $3,975$ tons in inventory compared to only producing $15,900$ tons?