One of the great strengths of RCA is its ability to reflect operational cause and effect relationships when they are monetized. (Keep in mind this is something financial reporting driven cost accounting only does at the most general, entity wide level.)
How do you know if your financial decision support information is causal?
Your financial model must be based on an operational model that reflects resources, processes and the operational quantity flows. Causality applies equally to both operational and monetary quantities.
The flow of operational quantities should show fixed quantities and proportional quantities and should be reflected clearly in the monetary model. Causality applies to both fixed costs and proportional costs.
The fixed and proportional quantities and money should start at the product, service, or other equivalent managerial objective. Only quantities and costs with strong causal relationships should be included. No high-level generalized allocations!
Business levels such as product/service groups, families, or lines should be used to bring in organizational costs that have strong causal relationships to managerial objectives at that level but lower levels. Examples could include a marketing group at the product family level, a warehouse for a product group, or a business analysis team that works for the product group manager.
Idle and excess capacity must not be ignored and should be tracked to the appropriate organizational level responsible for over-acquisition or generating market demand. Keep in mind that production/service providing activities are very seldom responsible for excess capacity, except when they have created it by becoming more efficient…..and for that they should be generously rewarded, not held accountable for excess capacity. One can argue that marketing and sales is responsible for most excess/idle capacity, unless another manager chose to buy more capacity than demand justified….hopefully, for a good reason.
If your product or service costs fluctuate with volume and mix, your cost information clearly has a causality deficiency.
You must do special analyses or studies to determine the operational cause of monetary effects/results or realistic monetary results of operational changes.
Operations and finance argue extensively over the “economic reality” of cost information.
I could go on, but hopefully, these eight points give you an idea of the high quality causal internal decision support information that RCA can create. I welcome your questions, observations, comments, and/or challenges.