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Resource Consumption Accounting

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INTRODUCTION
The role of management accounting is to provide the tools and information for planning,
monitoring and controlling enterprise performance and effective decision support. Management’s
ability to achieve the companies’ strategic objectives during the conversion of resources into
saleable products and services directly depends on the quality of the data Management
Accounting provides. Resource Consumption Accounting (RCA) is a superior management
accounting approach that provides benefits not achievable through traditional management
accounting approaches.
Defination:
Resource Consumption Accounting (RCA) is formally defined as a dynamic, fully integrated,
principle-based, and comprehensive management accounting approach that provides
managers with decision support information for enterprise optimization.
Why RCA was developed
The correct calculation and understanding of costs and cost flows are critical for any
Management Accounting system. Resource Consumption Accounting (RCA) is a ‘made in the
U.S.’ management accounting approach, based on GPK
a
(Grenzplankostenrechnung), and
Activity-based Costing
b
(ABC) approaches. GPK has been used to great effect by manufacturers
and service companies in Europe for several decades. ABC provides enhanced analytical
capabilities and adds the process view of an enterprise’s costs. As stated in the International
Good Practice Guidance published by IFAC PAIB Committee in July 2009,
A sophisticated approach at the upper levels of the continuum of costing techniques provides the
ability to derive costs directly from operational resource data, or to isolate and measure unused
capacity costs.
PRINCIPLES OF RCA
Causality
The principle of causality is the most important concept covering cause and effect relationship.
Causality requires resource flows and their costs to be modeled from resource to consumers
(support and direct) through the value chain on strict cause and effect basis. It means the final
product and service will not reflect full cost as defined by generally accepted accounting

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principles. Full cost requires non-causal allocation of costs to the unit level of a product or
service.
Responsiveness
The principle of responsiveness ensures the compliance with the principle of causality in
modelling the resource consumption with main focus on cost behaviour. Responsiveness governs
the fixed and proportional costs relationship between resource pools. The principle of
responsiveness has a number of advantages
1. Allowing inverse relationship between total cost and total volume when manufacturing more
complex products.
2. Providing managers specific insights into resources when they relate them to changes in
product output.
3. Enabling the accurate modelling of an organization’s economic flow of goods and services
regardless of its complexity.
1
Work (or Process) visibility
The principle of work (or process) visibility is adopted from Activity-Based Costing (ABC) and
is applied with quantity based drivers when needed for decision support or process
improvements. Sometimes tracing resource flows between cost objects does not yield sufficient
information for managerial decisions while it is necessary to know what activity is executed in
the resource consumption between resource pools.
RCA BENEFITS
Management Aspect Benefit
Analysis »
A clear delineation of costs affected by decisions at different levels within management
1
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INTRODUCTION The role of management accounting is to provide the tools and information for planning, monitoring and controlling enterprise performance and effective decision support. Management’s ability to achieve the companies’ strategic objectives during the conversion of resources into saleable products and services directly depends on the quality of the data Management Accounting provides. Resource Consumption Accounting (RCA) is a superior management accounting approach that provides benefits not achievable through traditional management accounting approaches. Defination: Resource Consumption Accounting (RCA) is formally defined as a dynamic, fully integrated, principle-based, and comprehensive management accounting approach that provides managers with decision support information for enterprise optimization. Why RCA was developed The correct calculation and understa ...
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