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RCA Discussion: RCA Modeling Basics
Larry R. White, CMA, CFM, CPA, CGFM
Executive Director
Resource Consumption Accounting Institute
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Resource Consumption Accounting
• RCA Inherits Core Principles from German Cost Management (GPK)– Practiced since the Late 1940’s– Used in 3,000+ Companies– GPK Strengths:
• Cost and Capacity Planning• Marginal Profitability
Analysis• Focus:
– Internal Management Decision Making
RCA
Resource viewAdvantages
Process viewAdvantages
GPK ABC
Capacity Analysis and Management
Process Analysis and Management
Capacity-Focused
Activity-Focused
CAUSALITY ANALOGY
ModelingConcepts
Information Use
Concepts
OperationalModelCosted
BaselineOptimizationInformation
Inputs:
Resources
Output:Information
For Decisions
CAUSALITY ANALOGY
ModelingConcepts
Information Use
Concepts
OperationalModelCosted
BaselineOptimizationInformation
Inputs:
Resources
Output:Information
For Decisions
• Resource• Managerial
Objective• Cost• Responsiveness• Traceability• Capacity• Work• Attributability• Homogeneity• Integrated Data
Orientation
• Avoidability• Divisibility• Interdependence• Interchangeability
• Objectivity• Accuracy• Verifiability• Measurability• Materiality
• Impartiality• Congruence
Concepts
Constraints
Concepts
Constraints
Resources
Define as Resource PoolsBased on Output (and Capability)
Resources
• Capability– Qualitative Characteristics
• Capacity– Productive– Non-Productive– Idle/Excess
• Consumption Characteristics– Relationship to Output– Operational Quantity and Cost
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Model Resource Relationships
Output
Responsiveness
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Prod Line A Prod Line B
Variability
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Relationship of Resources to Output& Summarize
Primary ConsumptionRelationships
Relationship of Resources to Output
Primary ConsumptionRelationships
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Plant Maintenance Resource Pool Output Measure: Maintenance Labor HourOutput Quantity: 20,000 Hours
Primary Costs Fixed Proportional
Technician Wages -$ 600,000$
Supervisor Salary 80,000$ -$
General Material 12,000$ 100,000$
Depreciation: Shop Equipment 50,000$ -$
142,000$ 700,000$
Secondary Costs
Resource Pool Output Fixed Qty Prop Qty
Utilities MW-Hrs 40 160 6,000$ 24,000$
Activity/Process Driver Fixed Qty Prop Qty
HR: Benefits Adjustments # Adjusts 22 0 1,100$ -$ Purchase: Gen Materials # PO's 10 200 500$ 10,000$
7,600$ 34,000$
Total Resource Pool Costs 149,600$ 734,000$
Unit Cost Rates (/20,000 Hrs) 7.48 36.70
RCA Information
Define as Resource PoolsBased on Output (and Capability)
Trace Consumption Relationships between Resource Pools
Primary ConsumptionRelationships
SecondaryConsumptionRelationships
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Plant Maintenance Resource Pool Output Measure: Maintenance Labor HourOutput Quantity: 20,000 Hours
Primary Costs Fixed Proportional
Technician Wages -$ 600,000$
Supervisor Salary 80,000$ -$
General Material 12,000$ 100,000$
Depreciation: Shop Equipment 50,000$ -$
142,000$ 700,000$
Secondary Costs
Resource Pool Output Fixed Qty Prop Qty
Utilities MW-Hrs 40 160 6,000$ 24,000$
Activity/Process Driver Fixed Qty Prop Qty
HR: Benefits Adjustments # Adjusts 22 0 1,100$ -$ Purchase: Gen Materials # PO's 10 200 500$ 10,000$
7,600$ 34,000$
Total Resource Pool Costs 149,600$ 734,000$
Unit Cost Rates (/20,000 Hrs) 7.48 36.70
RCA Information
Summarize
Primary ConsumptionRelationships
SecondaryConsumptionRelationships
The RCA Model
1. Identify the Resources– Identify the organization’s highest level managerial objectives– Identify the resources that produce those objectives– Identify the support resources– Capture any other organizational resources– Resources are grouped into logical resource pools based on their
characteristics, output, and relationship to managerial objectives
2. Identify the Resource Relationships– Map the cause and effect relationships between resources– Map the flow of resources between resource pools to final
managerial objectives • Track fixed and proportional relationships
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The RCA Model
• At this point, you have created a cause and effect based model of your operations. – You can see resource capacity issues and opportunities.
3.Apply Costs to the Model– Resource costs are determined and applied to the
modeled relationships
You can see the cost of operations and have the operational, capacity, and cost information for
decisions and planning.
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Simple Example
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Service/Product
DimensionalP&L
Service, Customer,Etc.
Activity 1
Indirect 1
Indirect 2
Direct
Non-causal Costs
RCA StoryboardPresentation at MESA US Conference
Metrics Makeover Contest
RCA Recognition
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Copied from IFAC Information Paper: Evaluating The Costing Journey: A Costing Levels Continuum Maturity Model.
Activity Based Costing
Traditional StandardCosting
Diagram from IFAC Information Paper:Evaluating The Costing Journey: A Costing
Levels Continuum Maturity Modelwww.ifac.org
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www.RCAInstitute.org
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