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RCA Discussion: RCA’s Focus on Resources

RCA Discussion: RCA’s Focus on Resources. Larry R. White, CMA, CFM, CPA, CGFM Executive Director, Resource Consumption Accounting Institute. What Causes Costs?. Resources (also creates any revenues!). Simple Process. Another Resource Pool (s) Or Final Product/Service. Resource

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RCA Discussion: RCA’s Focus on Resources

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  1. RCA Discussion: RCA’s Focus on Resources Larry R. White, CMA, CFM, CPA, CGFM Executive Director, Resource Consumption Accounting Institute

  2. What Causes Costs? Resources (also creates any revenues!)

  3. Simple Process Another Resource Pool (s) Or Final Product/Service Resource Pool Proportional OUTPUT Fixed Organizational Element (Support or Production) Material/Commodity Labor Equipment Operating Budget Material Services (Reflecting Resources Applied) Resource Quantities Drive Monetary Quantities 3

  4. More Realistic Resource Flows Resource Pool A Final Output 1 Resource Pool E Resource Pool B Final Output 2 Resource Pool F Final Output 3 Resource Pool C Resource Pool G Final Output 4 Resource Pool D Resource Pool H

  5. What Are the Primary Characteristics of Resources? • Capability • Quality or Qualitative Characteristics • Capacity • Quantity They Provide • Consumption/Cost • Consumption/Cost Structure • Consumption/Cost Behavior

  6. 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?

  7. 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

  8. 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

  9. Capacity Analysis and Management Process Analysis and Management RCA Resource view Advantages Process view Advantages ABC GPK Activity-Focused Capacity-Focused 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 • 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

  10. www.RCAInstitute.org lwhite@rcainstitute.org 757 288 6082

  11. RCA and Interrelationships • Quantity Consumption with Values Qty & $'s • Resource Interrelationships - Activities Consumed by the Resources that the Services are Provided for Cost Object • Activities Consumed by a Cost Objects Activity 2 Utilities Qty & $'s Activity 1 Qty & $'s Qty & $'s Activity 4 Facilities Procurement Qty & $'s Qty & $'s Human Resources Plant Maintenance © RCA Institute 2010

  12. S: Ancillary Production Equipment S: Plant Engineering and Maintenance S: Administration Human Resources & Accounting RP: Chiller (Hours) Capacity: 50,000 Output Qty: 50,000 RP: PlantMaintenance (Maint. Labor) Capacity: 30,000 Output Qty: 30,000 RP: Dryer (Hours) Capacity: 100 Output Qty: 100 Legend S-Support P- Production Perform Accounting Perform Admin Department P: Extrusion Line S: Quality Assurance Resource Pool Abbreviated RP QA Testing RP: QA Labor (Labor hours) Capacity: 14,000 Output Qty: 14,000 Activity RP: Extrusion Labor (Labor hours) Capacity; 32,000 Output Qty: 30,000 RP: Extrusion Machine1 (Machine hours) Capacity; 17,520 Output Qty: 10,000 Product Returns Perform HR Manufacturing Costs Product Support Cost Budgeted Products RP: Admin Labor (Labor hours) Capacity: 17,000 Output Qty: 17,000 Common Fixed Costs Product P & L’s RCA Storyboard

  13. RCA Information

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