Variable costing uses a contribution margin income statement.This is one of the key aspects of variable costing.

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Variable costing calculates contribution margin by subtracting variable costs from sales, and then deducts fixed costs to determine net income. This approach is represented in the contribution margin income statement, which highlights the contribution margin as the key measure of profitability. In contrast, absorption costing includes both fixed and variable costs in the product cost per unit, and may distort profitability by shifting fixed costs to inventory and subsequently to cost of goods sold.

Variable Costing Uses a Contribution Margin Income Statement