RCA Discussion:
RCA’s Focus on Resources
Larry R. White, CMA, CFM, CPA, CGFM
Executive Director,
Resource Consumption Accounting Institute
1
What Causes Costs?
Resources
(also creates any revenues!)
2
Simple Process
Resource
Pool
Proportional
OUTPUT
Fixed
Organizational Element
(Support or
Production)
Material/Commodity
Labor
Equipment
Operating Budget
Another
Resource
Pool (s)
Or Final
Product/Service
Material
Services
(Reflecting
Resources
Applied)
Resource Quantities Drive Monetary Quantities
3
More Realistic Resource Flows
Resource Pool A
Resource Pool E
Resource Pool B
Final Output 1
Final Output 2
Resource Pool F
Final Output 3
Resource Pool C
Resource Pool G
Final Output 4
Resource Pool D
Resource Pool H
4
What Are the Primary Characteristics of
Resources?
• Capability
– Quality or Qualitative Characteristics
• Capacity
– Quantity They Provide
• Consumption/Cost
– Consumption/Cost Structure
– Consumption/Cost Behavior
5
How Do We Define Capacity?
• Productive
• Non-Productive
• Idle/Excess
Questions:
• Who is Responsible for Idle & Excess Capacity?
• What can Allocations of Idle & Excess Capacity
Do to Costs?
6
Connects Operations & Finance
Operational View
Financial View
Resource/Resource Pools
Intermediate Outputs
Processes/Value Streams
Products/Services
Real Time
Action Oriented
Internally Focused
FR Time
Report Oriented
Externally Focused
Resource Consumption Accounting
Pillar 1: Focus on Resources & their Consumption


Understand your Resources & Their Consumption….Understand Cost
Provides a Framework for Capacity Management
Pillar 2: Quantity Structure for Resource Consumption




Operational Quantities Drive Costs
Model the Operation & Use of Resources….then Apply Cost
Enables Resource Capacity Management
Demonstrates Causality of Value Chain Relationships
Pillar 3: Recognizing the Inherent and Changing Nature of Costs




Resource Pools Start with an Inherent Cost Structure
As Resources are Consumed, the Nature of their Costs Change
Costs that are Initially Proportional by Nature can Change from Proportional to
Fixed Based on Consumption Patterns
Allows Value Chain Modeling of Resource Cost Responsiveness
8
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
– Principles Implemented by 3,000+ Companies
Capacity
Analysis and
Management
Process
Analysis and
Management
RCA
• RCA Integrates
– Activity-based Costing and Throughput Concepts
• RCA Creates an Integrated Economic
Model of Operations for Decision Making
– Enterprise Optimization
– Principle Based
– Superior Marginal Analytics
Resource
view
Advantages
GPK
CapacityFocused
Process view
Advantages
ABC
ActivityFocused
9
www.RCAInstitute.org
lwhite@rcainstitute.org
757 288 6082
10
RCA and Interrelationships
- Quantity Consumption with Values
- Resource Interrelationships - Activities
Consumed by the Resources that the Services
are Provided for
- Activities Consumed by a Cost Objects
4/13/2015 7:05 AM
© RCA Institute 2010
11
RCA Storyboard
S: Ancillary
Production
Equipment
RP: Dryer
(Hours)
Capacity: 100
Output Qty: 100
S: Plant
Engineering and
Maintenance
RP: Chiller
(Hours)
Capacity: 50,000
Output Qty: 50,000
RP: Plant Maintenance
(Maint. Labor)
Capacity: 30,000
Output Qty: 30,000
S: Administration
Human Resources
& Accounting
Perfor
m
RP: Admin Labor
(Labor hours)
Capacity: 17,000
Output Qty: 17,000
HR
Legend
Perfor
m
S-Support
Accou
nting
P- Production
Perfor
m
P: Extrusion Line
Department
S: Quality
Assurance
Admin
Resource Pool
Abbreviated RP
RP: Extrusion Labor
(Labor hours)
Capacity; 32,000
Output Qty: 30,000
RP: Extrusion Machine1
(Machine hours)
Capacity; 17,520
Output Qty: 10,000
RP: QA Labor
(Labor hours)
Capacity: 14,000
Output Qty: 14,000
QA
Testin
g
Activ
ity
Produ
ct
Retur
ns
Manufacturing Costs
Product Support Cost
Budgeted Products
Product P & L’s
Common Fixed Costs
12
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