Which two concepts are studied in cost-volume-profit analysis?Choose 2 answers Profits Liabilities Inventory Levels of activity

Breakdown of the Problem

To identify the two concepts studied in cost-volume-profit (CVP) analysis, we need to evaluate each option in relation to CVP analysis.

Relevant Concepts

Cost-volume-profit analysis focuses on how changes in costs and volume affect a company's operating income and net income. The primary concepts involved include:

1. Profits: This is a central focus of CVP analysis, as it helps determine how profit levels change with different sales volumes.
2. Levels of Activity: This concept refers to the different levels of output or sales volume and is essential for analyzing how varying sales levels can impact profits.

Analysis and Detail

• Profits: This concept is critical because CVP analysis aims to understand the relationships between revenues, costs, and profits to aid decision-making.
• Levels of Activity: This is important for assessing how changing the level of production impacts total costs and, consequently, profits.

Verify and Summarize

By analyzing the concepts, we confirm that "Profits" and "Levels of Activity" are relevant to cost-volume-profit analysis. "Liabilities" and "Inventory" are not central to this analysis.

Final Answer

The two concepts studied in cost-volume-profit analysis are:

1. Profits
2. Levels of Activity