Grenzplankostenrechnung - Concepts of GPK

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 (whether final product or support service) on a causal basis (referred to as the principle of causality). 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 (P&L) statement. For example, with GPK, fixed costs that relate to a product group or a product line (e.g., R&D, advertising costs) 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 (e.g., all product and cost-to-serve 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".