MC & TAC

mc takes in only variable costs. variable costs are entirely production related thus and the margin calculated under mc gives a “profit” that is independent of fixed costs. now, the argument is that fixed costs will remain even if you are not producing anything.

so u can imagine that if u want to make different products, you want some basis to decide which of these product to produce. that basis is to IGNORE the fixed costs and simply work on expected margins.

tac takes in the total costs incurred thus it simply makes common sense that you shd be reporting ALL costs that have been incurred to produce. if u ignore costs, then your profit/loss and balance sheet will not be accurate and may even be used to misrepresent a picture of your company