Process Costing Income Statements

Process Costing Income Statements

The process costing income statements are used in manufacturing enterprises where production is considered in terms of processes or departments with costs proportionally to the processes involved (Wild & Shaw, 2019). This method of cost accumulation involves summing up direct materials and indirectly related labor expenses and manufacturing overheads in every processing step before prorating the total cost per unit produced in the given period.

Hypothetical Example

Consider a manufacturing company, XYZ Paints, producing paint in three processes (Warren et al., 2020).These are some of the tasks that one may be required to do in the production line and they include; Mixing, Coloring and Packaging.

The month of March costs incurred are as follows

Process Costing Income Statement for March:

XYZ Paints

This statement enables identification of cost by embracing the process thus acting as a tool for efficiency and cost control.

References

Warren, C. S., Jones, J. P., & Tayler, W. B. (2020). Financial and managerial accounting. Cengage Learning, Inc.

Wild, J., & Shaw, K. (2019). (8th ed.). Financial and managerial accounting: Information for decisions. McGraw-Hill

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