Grenzplankostenrechnung


Grenzplankostenrechnung is a German costing methodology, developed in the late 1940s and 1950s, designed to provide a consistent and accurate application of how managerial costs are calculated and assigned to a product or service. The term Grenzplankostenrechnung, often referred to as GPK, has been translated as either Marginal Planned Cost Accounting or Flexible Analytic Cost Planning and Accounting.
The GPK methodology has become the standard for cost accounting in Germany as a "result of the modern, strong controlling culture in German corporations". German firms that use GPK methodology include Deutsche Telekom, Daimler AG, Porsche AG, Deutsche Bank, and Deutsche Post. These companies have integrated their costing information systems based on ERP software and they tend to reside in industries with highly complex processes. However, GPK is not exclusive to highly complex organizations; GPK is also applied to less complex businesses.
GPK's objective is to provide meaningful insight and analysis of accounting information that benefits internal users, such as controllers, project managers, plant managers, versus other traditional costing systems that primarily focus on analyzing the firm's profitability from an external reporting perspective complying with financial standards, and/or regulatory bodies' demands such as the or the taxation agency. Thus, the GPK marginal system unites and addresses the needs of both financial and managerial accounting functionality and costing requirements.
Resource Consumption Accounting is based, among others, on key principles of German managerial accounting that are found in GPK.

Background

The origins of GPK are credited to :de:Hans-Georg Plaut|Hans-Georg Plaut, an automotive engineer and Wolfgang Kilger, an academic, working towards the mutual goal of identifying and delivering a sustained methodology designed to correct and enhance cost accounting information. Plaut concentrated on the practical elements of GPK, while Kilger provided the academic discipline and GPK documentation that is still being published in cost accounting textbooks taught in German-speaking universities. The primary textbook on GPK is Flexible Plankostenrechnung und Deckungsbeitragsrechnung.
In 1946, Plaut founded an independent consulting business in Hannover, Germany which continued to grow employing more than 2,000 consultants. Plaut and Kilger focused on creating a cost accounting system that would cater to managers who are responsible for controlling costs, managing profits and providing information that would enable managers to make informed decisions.

Concepts of GPK

GPK is a marginal costing system and is decidedly more comprehensive than most U.S. cost management systems because of the level of organizational planning and control and its emphasis on accurate operational modeling.
With GPK's marginal-based approach, internal service and saleable product/service costs should only reflect the direct and indirect costs that can be linked to individual outputs on a causal basis. Proportional costs in GPK consists of direct and indirect costs that will vary with the particular output. Proportional costs provide the first contribution margin level that supports short-term decisions and once proportional costs are subtracted from revenue, it reveals whether the product or service is profitable or not. GPK adopters' marginal practices have varied, for example, not all adopters adhere to strict marginal practices such as the pre-allocation of fixed costs based on planned product/service volumes.
Fixed costs, innately do not vary with outputs and usually are not associated with individual outputs' costs. However, in practice, GPK adopters often calculate a standard per-unit-rate for fixed product/service costs and a separate per-unit-rate for proportional product/service costs. The balance of costs not causally assignable to the lowest level product or service can be assigned at yet higher levels within the marginal costing system's multi-level Profit & Loss statement. For example, with GPK, fixed costs that relate to a product group or a product line are assigned to the product group or product line reporting/management dimension in the P&L. This marginal costing approach offers managers greater flexibility to view, analyze and monitor costs for their area of responsibility. Thus GPK assigns all costs to the P&L but it does not fully absorb to the lowest level product or service. GPK's multi-dimensional marginal view of the organization supports operational managers with the most relevant information for strategic decision-making purposes about "what products or services to offer" and at "what price to sell them".

Core elements of GPK

According to German Professors Dr.'s Friedl, Kuepper and Pedell, the fundamental structure of GPK consists of four important elements:
  1. Cost-type accounting,
  2. Cost center accounting,
  3. Product cost accounting, and
  4. Contribution margin accounting for profitability analysis.
GPK distinguishes two types of cost centers:
With the GPK marginal costing approach, primary cost centers outputs consumed by products/services reflect direct causal relationships, as well as causally-linked costs originating from supporting secondary cost centers that primary cost centers need to function. As such, both of these causally-linked outputs—if proportional in nature—will vary with product/service output volume and are reflected in the appropriate product/service contribution margin in the P&L.

Footnotes