1

RCA Discussion: The Concept of Responsiveness

Larry R. White, CMA, CFM, CPA, CGFM

Executive Director Resource Consumption Accounting Institute

2

Resource Consumption Accounting

• RCA Inherits Core Principles from German Cost Management (GPK)– GPK is a Well Developed Standard Costing

System– Principles Applied in Practice since the Late

1940’s– Implemented by 3,000+ Companies

• RCA Creates an Integrated Economic Model of Operations for Decision Making– Enterprise Optimization– Principle Based– Superior Marginal Analytics

RCARCA

Resource view

Advantages

Process view

Advantages

GPK ABC

Capacity Analysis

and Management

Process Analysis and Management

Capacity-Focused

Activity-Focused

3

IMA Managerial Costing Conceptual Framework Task Force

Managerial Costing Conceptual Framework

Modeling ConceptsQualitative Characteristics

4IMA Managerial Costing Conceptual Framework Task Force

Modeling Concepts

Information Use ConceptsQualitative Characteristics

5

IMA Managerial Costing Conceptual Framework Task Force

Information Use Concepts

• The correlation between a particular managerial objective’s output quantity and the input quantities required to produce that output– It facilitates accurate marginal cost information,– It provides insights into the nature of cause and

effect relationships, and– It enables the costing of managerial objectives

at all levels throughout the organization.

6

Reponsiveness

Related Traditional Concepts

• Variable and Fixed Costs• Step Fixed Costs

– Capacity Concept blended in• RCA:

– Proportional Input output relationships– Fixed Input output relationships– Resource Quantities/Capacity Modeled first

7

Variability

8

Responsiveness

9

Responsiveness

10

Product 1Product 2Product 3

Machine 1 Machine 2 PackagingSupervisor

Labor

Supplies

Depreciation F

FP&FP&F

Supervisor

Labor

Supplies

Depreciation F

FP&FP&F

Supervisor

Labor

Supplies

Depreciation F

FP&FP&F

Electricity Floor SpaceP F

0.2 0.20.2 0.10.3 0.4

0.10.10.2

Fixed Rate per Machine Hr Proportional Rate per Machine Hr

11

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

12

www.RCAInstitute.org

lwhite@rcainstitute.org

757 288 6082

13

RCA Storyboard

Product Support Cost

S: Ancillary Production Equipment

S: AdministrationHuman Resources

& Accounting

S: Quality Assurance

RP: Dryer (Hours)Capacity: 100Output Qty: 100

S: Plant Engineering and

Maintenance

RP: Plant Maintenance (Maint. Labor)Capacity: 30,000Output Qty: 30,000

P: Extrusion Line

RP: Extrusion Labor (Labor hours)Capacity; 32,000Output Qty: 30,000

Product P & L’s

Department

Resource PoolAbbreviated RP

Activity

RP: Chiller (Hours)Capacity: 50,000Output Qty: 50,000

Acctg

Admin

QA Test

Legend

S-Support

P- Production

Common Fixed Costs

Eval Defect

RP: Extrusion Machine1(Machine hours)Capacity; 17,520Output Qty: 10,000

Manufacturing Costs

Budgeted Products

RP: QA Labor(Labor hours)Capacity: 14,000Output Qty: 14,000

RP: Admin Labor(Labor hours)Capacity: 17,000Output Qty: 17,000

HR