A variable costing income statement is essentially the same as a traditional income statement.

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While the format of the two income statements may appear similar, the key difference between a variable costing income statement and a traditional income statement is the treatment of fixed manufacturing overhead costs. A variable costing income statement only includes variable costs (such as direct materials, direct labor, and variable overhead) in cost of goods sold, while fixed manufacturing overhead costs are treated as period costs and are not included in the calculation of cost of goods sold. This can result in significant differences between the net income reported on a variable costing income statement versus a traditional income statement, particularly if there are significant differences in the amount of fixed overhead costs incurred during a given period.

A Variable Costing Income Statement Is Essentially the Same as a Traditional