rca discussion: marginal costing and rca · rca discussion: marginal costing and rca larry r....
TRANSCRIPT
![Page 1: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/1.jpg)
1
RCA Discussion:
Marginal Costing and RCA
Larry R. White, CMA, CFM, CPA, CGFM
Executive Director
Resource Consumption Accounting Institute
![Page 2: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/2.jpg)
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
RCA
Resource view
Advantages
Process view
Advantages
GPK ABC
Capacity
Analysis and
Management
Process
Analysis and
Management
Capacity-
Focused
Activity-
Focused
![Page 3: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/3.jpg)
What is Marginal Costing?
• Wikipedia: – Marginal Cost is the change in total cost that arises
when the quantity produced changes by one unit.
– Marginal Costing (under Cost Accounting): This
method is used particularly for short-term decision-
making. Its principal tenets are: – Revenue (per product) - variable costs (per product) = contribution
(per product)
– Total contribution - total fixed costs = total profit or total loss)
• Thus, it does not attempt to allocate fixed costs in an arbitrary
manner to different products.
![Page 4: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/4.jpg)
A Closer Look
• What resource use (and costs) will change if
output changes?
• What you need to know: – Relationships within a process: What resources in the
value chain contribute to creating the output?
– Characteristics of the resources used:
• Which resources will need beefed up or reduced?
• What resource quantities have fixed and proportional
relationships with the change in output?
– Costs associated with the resource changes.
![Page 5: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/5.jpg)
Consumption Concepts
Operational
Fixed Variable
Decision Support
Unavoidable Avoidable
Opportunity Cost
“Relevant Range”
Can be Modeled Basis for Action
Divisibility of Resource Information
![Page 6: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/6.jpg)
Variability
6
Machine A Machine B
![Page 7: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/7.jpg)
Responsiveness
7
Machine A Machine B
![Page 8: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/8.jpg)
Responsiveness
8
Product 1
Product 2
Product 3
Machine 1 Machine 2 Packaging
Supervisor
Labor
Supplies
Depreciation F
F
P&F
P&F
Supervisor
Labor
Supplies
Depreciation F
F
P&F
P&F
Supervisor
Labor
Supplies
Depreciation F
F
P&F
P&F
Electricity Floor Space
P F
0.2 0.2 0.2 0.1 0.3 0.4
0.1
0.1
0.2
Fixed Rate per Machine Hr Proportional Rate per Machine Hr
![Page 9: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/9.jpg)
9
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$ 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
![Page 10: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/10.jpg)
RCA Storyboard RCA Model Storyboard
![Page 11: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/11.jpg)
Examples of RCA Information
![Page 12: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/12.jpg)
Examples of RCA Information Copyright 2011 MESA North American
Conference
![Page 13: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/13.jpg)
Examples of RCA Information Copyright 2011 MESA North American
Conference
![Page 14: RCA Discussion: Marginal Costing and RCA · RCA Discussion: Marginal Costing and RCA Larry R. White, CMA, CFM, CPA, CGFM ... Model of Operations for Decision Making –Enterprise](https://reader030.vdocuments.net/reader030/viewer/2022040204/5ebc6ce59f0499083715c96a/html5/thumbnails/14.jpg)
14
www.RCAInstitute.org
757 288 6082