Resource and Process Consumption Accounting (RPCA)

Resource and Process Consumption Accounting (RPCA) is part of the latest global trend in research on cost accounting, the essence of which is the integration of German Grenzplankostenrechnung (GPK) and American Activity Based Costing (ABC) within the framework of single resource-and-process-based costing.

Resource and Process Consumption Accounting  (RPCA) has been defined as systematic and comprehensive management cost accounting which integrates assumptions of German Grenzplankostenrechnung (GPK) and American Activity Based Costing (ABC) processing financial and non-financial data, according to strictly defined rules, into management information about costs of resources and processes, as well as costs and profitability of products, services, and customers, presented in a multi-dimensional way while  maintaining divisibility of cost information in terms of both actual and planned costs necessary to support short-, medium- and long-term decisions at all management tiers of the company [Zielinski 2014, p. 84].

In the USA paralel research on combining GPK and ABC was conducted under the name of RCA.

RPCA is a combination of detailed information on resources, their costs and usage (GPK) with information on costs and effectiveness of activities and processes (ABC), made in a manner ensuring cause-and-effect allocation of costs to products, services and customers, as well as high interpretation quality of costing information.

RPCA is cost accounting that has already been successfully implemented in several dozen companies in the production, service and trade industries. This type of cost accounting has been implemented in large and medium, as well as small companies. Extensive application of this type of cost accounting in various industries and sizes of companies indicates its versatility and potential for use in controlling processes of many organisations.

The structure of resource and process consumption accounting presented in the figure below shows that this concept involves the multi-stage allocation of costs between twelve types of objects, which are organized in four main categories: resources (resource cost centers), activities, cost objects and direct costs. These objects are connected through eleven relationships based on three main types of cost drivers: resource cost drivers (relationships no. [1], [3], [5], [9] and [10]), activity cost drivers (relationships no. [2], [4] and [6]), and cost object cost drivers (relationships no. [7], [8] and [11]). These relationships reflect the allocation of costs in RPCA, from resource cost centres and direct costs to final cost objects of products, services and customers.

Figure: Structure of resource and process consumption accounting (RPCA)

Source: [Zieliński 2014, p. 88].

The purpose of the approach to defining objects and relationships between them developed under RPCA is to provide complete financial information at all management tiers of the company while maintaining divisibility of cost levels. The adopted assumptions allow one to recognise costs of a given level as relevant or irrelevant in terms of making a specific decision and use of RPCA in making short-, medium- and long-term decisions.

RPCA implementation benefits:

  • Providing managers with the right level of detail and transparency of the cost and profitability information about products, services and customers.
  • Increasing the company's competitiveness and profitability by setting detailed management goals for products, services, customers, resources, and processes, and monitoring the performance at all organizational levels.
  • Improving resource usage and avoiding unused capacity costs.
  • Increasing the efficiency of operational, service and sales processes and striving to achieve operational excellence.
  • Support pricing and customer loyalty with reliable information on costs and profitability for customers and products and services.
  • Building and strengthening the image of a modern-day enterprise in the eyes of strategic customers and supply chains.
  • Increasing the controlling competence of the whole enterprise.
  • Increasing cost awareness among a wide range of employees.
  • A better understanding of the company's cost flexibility by providing information of marginal costs.
  • Adequately detailed basis for calculating the cost of unused resources using the practical capacity of resources in a manner that meets the requirements of the Polish Accounting Act and International Financial Reporting Standards (IFRS).