1. RCA Discussion: RCA Modeling, Cost Objects
Larry R. White, CMA, CFM, CPA, CGFM
Executive Director
Resource Consumption Accounting Institute

2. 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
Planning/Optimization
Marginal Analytics
Capacity Use Insights
RCA
Resource view
Advantages
Process view
GPK
ABC
Capacity Analysis and Management
Process Analysis and Management
Capacity-Focused
Activity-Focused

3. RCA Recognition Activity Based Costing Traditional Standard Costing
The International Federation of Accountants completed an International Good Practice Guide on Costing in July In doing this they created a maturity model for approaches to doing costing.
To the left are the costing approaches that meet basic financial reporting requirements.
To the right are approaches that provide the information for forward looking modeling and planning.
IFAC rated RCA as the most mature costing approach short of doing full simulation, and simulation requires the techniques used in RCA.
Copied from IFAC Information Paper: Evaluating The Costing
Journey: A Costing Levels Continuum Maturity Model.
Diagram from IFAC Information Paper:
Evaluating The Costing Journey: A Costing
Levels Continuum Maturity Model
RCA Institute All Rights Reserved

4. CAUSALITY ANALOGY Information Use Concepts Modeling Concepts Inputs:
Resources
Output:
Information
For
Decisions
CAUSALITY
ANALOGY
Information
Use
Concepts
Modeling
Concepts
Operational
Model
Costed
Baseline
Optimization
Information

5. CAUSALITY ANALOGY Information Use Concepts Modeling Concepts Inputs:
Resources
Output:
Information
For
Decisions
CAUSALITY
ANALOGY
Concepts
Resource
Managerial Objective
Cost
Responsiveness
Traceability
Capacity
Work
Attributability
Homogeneity
Integrated Data Orientation
Information
Use
Concepts
Modeling
Concepts
Concepts
Avoidability
Divisibility
Interdependence
Interchangeability
Operational
Model
Costed
Baseline
Optimization
Information
Constraints
Impartiality
Congruence
Constraints
Objectivity
Accuracy
Verifiability
Measurability
Materiality

6. Basic RCA Model Structure
Support
Quantitative
Resource Pools
Definition of
Material Causal
Relationships
Support
Activities
Primary Resource
Pools
Noncausal
Costs
(Excess
Capacity
Costs)
Primary Activities
To Illustrate:
Here you have a productive process that creates 3 products.
The correct way to handle a cost with a weak relationship to the output it to assign it to a level in the organization that can manage the cost – either by generating more sales or making the decision that it should be eliminated. If this isn’t done, product cost looks higher than it really is.
Product/Service
PROJ
Objects
Result Segments -
Revenue Responsibility

7. Managerial Cost Object Types
A Managerial Cost Object Collects Costs On The Basis Of The Consumption
Of Processes And Resources
Resource Centric
Cost Centers [Orgs]
Resource Pools [Similar Resources, Homogeneous Output]
Business Process [Services]
Product/Service Centric
Projects/Events (ex. Minor Construction…)
Orders (ex. Work, Maintenance, Service, Production, Job, Customers….)
Results Centric
Results Segments (Product/service Business Line – Product, Product Group, Family, Line, ...)
PROJ
PROD CC
(ex. Dir/Div…)
P&L RP
SERV WO
BPR
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8. Resource Pool
Resource Pools Are Groups Of “Like-minded” Resources Within An Organization That Produce A Homogeneous Output
Product, Semifinished component, Maintenance Hour
Primary Cost = Resource in the Pool
Secondary Cost = Output from Supporting Resource Pools
Resource Pool Cost Objects are Transitional
Provide Output to another Cost Object
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9. Basic RCA Model Structure
Support
Quantitative
Resource Pools
Definition of
Material Causal
Relationships
Support
Activities
Primary Resource
Pools
Noncausal
Costs
(Excess
Capacity
Costs)
Primary Activities
To Illustrate:
Here you have a productive process that creates 3 products.
The correct way to handle a cost with a weak relationship to the output it to assign it to a level in the organization that can manage the cost – either by generating more sales or making the decision that it should be eliminated. If this isn’t done, product cost looks higher than it really is.
Product/Service
PROJ
Objects
Result Segments -
Revenue Responsibility

10. Business Process
Business Processes are the “work” or “task” being performed by a Resource Pool
Typically related to an action, a “verb”
Operate Machine, Conduct Setup, Process Vendor Invoices
An expression/description of how the capacity is utilized
A business process does not have capacity
Two Uses:
Provide information
Modeling Cost Effectiveness
Business Process Cost Objects are Transitional
Provide Output to another Cost Object
2/17/2019 6:34 PM
© RCA Institute 2010

11. Basic RCA Model Structure
Support
Quantitative
Resource Pools
Definition of
Material Causal
Relationships
Support
Activities
Primary Resource
Pools
Noncausal
Costs
(Excess
Capacity
Costs)
Primary Activities
To Illustrate:
Here you have a productive process that creates 3 products.
The correct way to handle a cost with a weak relationship to the output it to assign it to a level in the organization that can manage the cost – either by generating more sales or making the decision that it should be eliminated. If this isn’t done, product cost looks higher than it really is.
Product/Service
PROJ
Objects
Result Segments -
Revenue Responsibility

12. Project Objects
An object used to plan, collect, monitor, and settle costs for internal or external Project.
Projects normally have a definite start and end.
External projects normally part of a Results Segment.
Internal projects may or may not be, but provides resource capacity use accountability.
2/17/2019 6:34 PM
© RCA Institute 2010

13. Basic RCA Model Structure
Support
Quantitative
Resource Pools
Definition of
Material Causal
Relationships
Support
Activities
Primary Resource
Pools
Noncausal
Costs
(Excess
Capacity
Costs)
Primary Activities
To Illustrate:
Here you have a productive process that creates 3 products.
The correct way to handle a cost with a weak relationship to the output it to assign it to a level in the organization that can manage the cost – either by generating more sales or making the decision that it should be eliminated. If this isn’t done, product cost looks higher than it really is.
Product/Service
PROJ
Objects
Result Segments -
Revenue Responsibility

14. Order Object Types
Cost Objects Used To Plan, Collect, Monitor, And Settle The Costs Of Specific Jobs And Events. Orders Are Used To Monitor The Costs Of Short Term Projects And Event/Job Costing
Examples: Sales Orders, Maintenance Orders, Job Orders, Event Orders.
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15. Basic RCA Model Structure
Support
Quantitative
Resource Pools
Definition of
Material Causal
Relationships
Support
Activities
Primary Resource
Pools
Noncausal
Costs
(Excess
Capacity
Costs)
Primary Activities
To Illustrate:
Here you have a productive process that creates 3 products.
The correct way to handle a cost with a weak relationship to the output it to assign it to a level in the organization that can manage the cost – either by generating more sales or making the decision that it should be eliminated. If this isn’t done, product cost looks higher than it really is.
Product/Service
PROJ
Objects
Result Segments -
Revenue Responsibility

16. Result Segment
A combination of different reporting dimensions used to represent costing data for various result levels. The final output or collection of cost objectives. Includes Revenue and Costs for each segment.
Result segments can be referred to as ‘management tiers’ sorted by related cost model objects such as:
Resources used for a Product/Service
Product Groups / Regional Areas
Business Units / Divisions
Corporate Entity
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© RCA Institute 2010

17. Result Segment
Results Segment Reporting With Management Tiers (Tiers Are Company Specific) That Can Facilitate A Manager’s Objectives For
Analysis
Control
Optimization
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18. Result Segments For example: Revenue
–(minus) Raw Material Product costs
= Margin 1
–(minus) Proportional Product conversion costs
= Margin 2
–(minus) Fixed Product conversion costs
= Margin 3
= Product Segment Results
–(minus) Product Region Distribution costs
= Margin 4
= Regional Segment Results
–(minus) Corporate R&D costs
= Margin 5
= Corporate Entity Segment Results
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19. Basic RCA Model Structure
Support
Quantitative
Resource Pools
Definition of
Material Causal
Relationships
Support
Activities
Primary Resource
Pools
Noncausal
Costs
(Excess
Capacity
Costs)
Primary Activities
To Illustrate:
Here you have a productive process that creates 3 products.
The correct way to handle a cost with a weak relationship to the output it to assign it to a level in the organization that can manage the cost – either by generating more sales or making the decision that it should be eliminated. If this isn’t done, product cost looks higher than it really is.
Product/Service
PROJ
Objects
Result Segments -
Revenue Responsibility

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