Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 19,125 tons of its granular. Because of this years mild winter, projected demand for its product is only 15,300 tons. Based on projected production and sales of 15,300 tons, the company estimates the following income using absorption costing.

Sales (15,300 tons at $84 per ton)	$ 1,285,200
Cost of goods sold (15,300 tons at $60 per ton)	918,000
Gross profit	367,200
Selling and administrative expenses	210,200
Income	$ 157,000

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 ($612,000/15,300 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 $302,000 per year. The companys 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 19,125 ton level even though it expects to sell only 15,300 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 19,125 tons and sales of 15,300 tons. Can the company report a positive income by increasing production to 19,125 tons and storing the 3,825 tons of excess production in inventory? 2. By how much does income increase by when producing 19,125 tons and storing 3,825 tons in inventory compared to only producing 15,300 tons?