January 2012 Discussion

Report
RCA Discussion:
RCA Modeling Basics
Larry R. White, CMA, CFM, CPA, CGFM
Executive Director
Resource Consumption Accounting Institute
1
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
Capacity
Analysis and
Management
Process Analysis
and Management
RCA
Resource view
Advantages
GPK
CapacityFocused
Process view
Advantages
ABC
ActivityFocused
2
Inputs:
CAUSALITY
ANALOGY
Modeling
Concepts
Information
Use
Concepts
Operational
Model
Costed
Baseline
Optimization
Information
Resources
Output:
Information
For
Decisions
Inputs:
Resources
CAUSALITY
ANALOGY
Modeling
Concepts
Information
Use
Concepts
Operational
Model
Costed
Baseline
Optimization
Information
Output:
Information
For
Decisions
Concepts
• Resource
• Managerial
Objective
• Cost
• Responsiveness
• Traceability
• Capacity
• Work
• Attributability
• Homogeneity
• Integrated Data
Orientation
Constraints
•
•
•
•
•
Objectivity
Accuracy
Verifiability
Measurability
Materiality
Concepts
•
•
•
•
Avoidability
Divisibility
Interdependence
Interchangeability
Constraints
• Impartiality
• Congruence
Resources
Define as Resource Pools
Based 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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7
Model Resource Relationships
Output
Responsiveness
Prod Line A
Prod Line B
9
Variability
10
Relationship of Resources to Output
& Summarize
Primary
Consumption
Relationships
Relationship of Resources to Output
Primary
Consumption
Relationships
RCA Information
Plant Maintenance Resource Pool
Output Measure: Maintenance Labor Hour
Output Quantity: 20,000 Hours
Primary Costs
Fixed
Proportional
Technician Wages
$
-
$
600,000
Supervisor Salary
$
80,000
$
General Material
$
12,000
$
Depreciation: Shop Equipment
$
50,000
$
$
142,000
$
700,000
$
6,000
$
24,000
$
$
1,100
500
$
$
10,000
$
7,600
$
34,000
$
149,600
$
734,000
100,000
-
Secondary Costs
Resource Pool
Output
Utilities
MW-Hrs
Activity/Process
Driver
HR: Benefits Adjustments
Purchase: Gen Materials
# Adjusts
# PO's
Fixed Qty Prop Qty
40
160
Fixed Qty Prop Qty
22
10
0
200
Total Resource Pool Costs
Unit Cost Rates (/20,000 Hrs)
7.48
36.70
13
Define as Resource Pools
Based on Output (and Capability)
Trace Consumption Relationships
between Resource Pools
Secondary
Consumption
Relationships
Primary
Consumption
Relationships
RCA Information
Plant Maintenance Resource Pool
Output Measure: Maintenance Labor Hour
Output Quantity: 20,000 Hours
Primary Costs
Fixed
Proportional
Technician Wages
$
-
$
600,000
Supervisor Salary
$
80,000
$
General Material
$
12,000
$
Depreciation: Shop Equipment
$
50,000
$
$
142,000
$
700,000
$
6,000
$
24,000
$
$
1,100
500
$
$
10,000
$
7,600
$
34,000
$
149,600
$
734,000
100,000
-
Secondary Costs
Resource Pool
Output
Utilities
MW-Hrs
Activity/Process
Driver
HR: Benefits Adjustments
Purchase: Gen Materials
# Adjusts
# PO's
Fixed Qty Prop Qty
40
160
Fixed Qty Prop Qty
22
10
0
200
Total Resource Pool Costs
Unit Cost Rates (/20,000 Hrs)
7.48
36.70
16
Summarize
Secondary
Consumption
Relationships
Primary
Consumption
Relationships
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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18
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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19
Simple Example
Indirect 1
Indirect 2
Direct
Non-causal
Costs
Activity 1
Service/
Product
Dimensional
P&L
Service, Customer,
Etc.
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20
Presentation at MESA US Conference
Metrics Makeover Contest
RCA Storyboard
RCA Recognition
Activity Based
Costing
Traditional Standard
Costing
Copied from IFAC Information
Diagram from
Paper:
IFAC
Evaluating
Information
ThePaper:
Costing
Journey: A Costing
Evaluating
Levels Continuum
The Costing
Maturity
Journey:
Model.
A Costing
Levels Continuum Maturity Model 22
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23

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