Explain variable costing and absorption costing and reconcile the di'erences when sales and production levels change. 4P8.34A (L0 1, g, 3,) Sun Company, a wholly owned subsidiary of Guardian Inc., produces and sells three main product lines. At the beginning of 2022, the president of Sun Company presented the budget to the parent company and accepted a commitment to contribute $15,800 to Guardian's consolidated prot in 2022. The president was condent that the year's prot would exceed the budget target, since the monthly sales reports had shown that sales for the year would be 10% more than what had been predicted in the budget. The president is both disturbed and confused when the controller presents an adjusted forecast as at November 30, 2022, indicating that prots will be 11% under budget. The two forecasts are presented below: SUN COMPANY Forecasts of Operating Results January 1, 2022 November 30, 2022 Sales W W Cost of sales 212,000: 233,200 Gross margin W W) Overapplied (underapplied) xed manufacturing overhead 0 (6,000) Actual gross margin W W Selling expenses W W Administrative expenses 26,800 26,800 Total operating expenses W W Earnings before tax $ 15,800 $ 14,060 fIncludes xed manufacturing overhead of $30,000. There have been no sales price changes or productmix shifts since the January 1, 2022, forecast. Variable costs have remained constant throughout the year. The only cost that has varied in the income statement is the underapplied manufacturing overhead. This happened because the company worked only 16,000 machine hours during 2022 (budgeted machine hours were 20,000) as a result of a shortage of raw materials when its main supplier was closed by a strike. Fortunately, Sun Company's nished goods inventory was large enough to ll all sales orders received. Instructions 21. Analyze and explain why prot has declined in spite of increased sales and control over costs. b. What plan, if any, could Sun Company adopt during December to improve the reported prot at year end? Explain your answer. c. Explain and illustrate how Sun Company could use a different internal cost reporting procedure that would not result in the confusing effect of the procedure it currently uses