DMI Printing Company produces luxury personal diaries for corporate clients. Diaries are designed for individual corporations. The companys operating budget for January 2023 included these data:

Number of diaries 15,000 Selling price per diary RM20 Variable cost per diary RM8 Fixed costs for the month RM145,000

The actual results for January 2023 were as follows:

Number of diaries sold 12,000 Average selling price per diary RM21 Variable cost per diary RM7 Fixed costs for the month RM150,000

DMI Printing Company develops its flexible budget based on budgeted per-output-unit revenue and per-output-unit variable costs without detailed analysis of budgeted inputs.

As the company's management accountant, you have been tasked with providing explanations for the disappointing January results. This comes after the executive vice president of the company noticed that the operating income for January fell considerably below expectations.

Required:

1. Prepare a static-budget-based variance analysis of the January performance.
2. Prepare a flexible-budget-based variance analysis of the January performance.
3. Examine the variance analysis conducted in part a and part b to identify the challenges encountered by DMI Printing Company.
4. DMI is considering two strategic changes: advertising their product and reducing the selling price to RM19 per diary. The implementation of these changes will result in a fixed cost increase of $15,000. However, as a potential benefit, they anticipate being able to boost the number of units sold to 15,000 units. The variable cost will remain unchanged based on the current situation. Assess whether DMI should proceed with this decision.