Final answer:
Profit variance analysis compares actual results to both flexible and static budgets to understand efficiency and volume variances in financial performance. The correct answer is C. Actual results with both the flexible and static budgets.
Step-by-step explanation:
A profit variance analysis typically compares the actual results with both flexible and static budgets. A flexible budget changes with different levels of activity, while a static budget remains unchanged from the original projections.
This type of analysis is crucial for understanding where the company's financial performance deviated from its plans, in terms of both efficiency and volume variances, and for what reasons those deviations occurred.
Considering a firm's cost structure is crucial, including its fixed and variable costs, and how these contribute to calculating average total cost, average variable cost, and marginal cost.
These calculations aid in the profit maximization decision-making process, combined with an analysis of sales and revenue within the market structure the firm operates in.