Question

Anheuser-Busch InBev is attempting to reduce its water usage. How could a company manager use a process cost summary to determine if the program to reduce water usage is successful?

Short answer

If the company successfully reduces water usage, its raw materials (water) costs should decline.

Step-by-step solution

Meaning Water conservation.

Water conservation refers to any measures taken to maintain the hydrosphere, manage freshwater resources responsibly, and meet present and future demands from the population (thus avoiding water scarcity).

Meaning of cost summary.

A production report called a process cost summary lists the expenses, output, and costsassociated with each production unit for a department. In other words, this report summarises all the production operations for a specific process or department.

Uses a process cost summary to determine if the program to reduce water usage is successful.

Water should cost less for the company if it successfully lowers water consumption. Similarly, industrial overhead expenses should decrease if the water used in its cleaning and cooling procedures is seen as an overhead expense. These cost reductions would come from reduced direct materials costs per equivalent unit and lower plant overhead costs per equivalent unit.