Variance analysis of fixed overhead costs is also useful when a company uses activity-based costing.

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Variance analysis of fixed overhead costs is useful in activity-based costing because it allows companies to determine if the costs are in line with the activities that are driving them. By comparing actual costs to budgeted or standard costs, variances can be identified and analyzed to determine the root cause and take corrective action. Activity-based costing provides more accuracy in assigning overhead costs to specific activities, which can improve the accuracy of variance analysis.

Variance Analysis of Fixed Overhead Costs Is Also Useful When