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Why in the income statement of marginal costing we have to deduct the variable costs from the revenue ?
Thanks in advance.
In future you must ask in the Ask the Tutor Forum is you want me to answer. This forum is for students to help each other 🙂
We always subtract costs from the revenue to arrive at the profit. With marginal costing we subtract the variable costs and arrive at the contribution, and then subtract the fixed costs so as to arrive at the profit.
All of this (and the reasons for the two approaches) are explained in detail in my free lectures on marginal and absorption costing. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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