Final answer:
Flexible Budget Variance Analysis is the method that requires the identification of actual variable and fixed costs, as well as budgeted rates and costs to analyze variances, by comparing actual spending to budgeted amounts at the actual output levels.
Step-by-step explanation:
The variance analysis method that requires a company to identify the actual variable and fixed costs, as well as budgeted rates and costs, is Flexible Budget Variance Analysis. This method allows companies to compare what was actually spent against what would have been expended at the actual levels of output. To conduct a flexible budget variance analysis, the company must first determine the cost structure for the firm, which includes separating costs into fixed and variable components and using the relevant formulas to calculate the total cost, average variable cost, average total cost, and marginal cost, as given in the Production, Costs, and Industry Structure chapter.