1. 1 RCA Discussion: The Concept of Responsiveness Larry R. White, CMA, CFM, CPA, CGFM Executive Director Resource Consumption Accounting Institute

2. 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

3. 3 IMA Managerial Costing Conceptual Framework Task Force Managerial Costing Conceptual Framework

4. Modeling Concepts Qualitative Characteristics 4 IMA Managerial Costing Conceptual Framework Task Force Modeling Concepts

5. Information Use Concepts Qualitative Characteristics 5 IMA Managerial Costing Conceptual Framework Task Force Information Use Concepts

6. 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

7. 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

8. Variability 8

9. Responsiveness 9

10. 10 Product 1 Product 2 Product 3 Machine 1Machine 2 Packaging Supervisor Labor Supplies Depreciation F F P&F Supervisor Labor Supplies Depreciation F F P&F Supervisor Labor Supplies Depreciation F F P&F Electricity Floor Space P F 0.2 0.1 0.3 0.4 0.1 0.2 Fixed Rate per Machine Hr Proportional Rate per Machine Hr

11. 11 RCA Information

12. 12 www.RCAInstitute.org lwhite@rcainstitute.org 757 288 6082

13. 13 RCA Storyboard Product Support Cost S: Ancillary Production Equipment S: Administration Human Resources & Accounting S: Quality Assurance RP: Dryer (Hours) Capacity: 100 Output Qty: 100 S: Plant Engineering and Maintenance RP: Plant Maintenance (Maint. Labor) Capacity: 30,000 Output Qty: 30,000 P: Extrusion Line RP: Extrusion Labor (Labor hours) Capacity; 32,000 Output Qty: 30,000 Product P & L’s Department Resource Pool Abbreviated RP Activity RP: Chiller (Hours) Capacity: 50,000 Output Qty: 50,000 Acctg Admin QA Test Legend S-Support P- Production Common Fixed Costs Eval Defect RP: Extrusion Machine1 (Machine hours) Capacity; 17,520 Output Qty: 10,000 Manufacturing Costs Budgeted Products RP: QA Labor (Labor hours) Capacity: 14,000 Output Qty: 14,000 RP: Admin Labor (Labor hours) Capacity: 17,000 Output Qty: 17,000 HR