1. Intermediate Cost Analysis and Management
Apply Role-Based Cost Control Principles to a Real World Scenario: M1A2 Main Gun Qualification Cases
Intermediate Cost Analysis
and Management
© Dale R. Geiger 2011

2. Training has its Costs
Training has its Costs. The picture is silly, but it emphasizes that there are costs to training. If you want to train your dog to get the paper, it will cost you some time. What other costs might there be? (cost of treats/rewards, cost of spoiled newspapers, etc.) What does it cost to train and qualify a crew to fire an M1A2 Abrams Main Battle Tank?

3. Terminal Learning Objective
Task: Apply Role-Based Cost Control Principles to a Real World Scenario
Condition: You are training to become an ACE with access to ICAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors.
Standard: with at least 80% accuracy
Determine appropriate characteristics of cost measurement and control process for case study scenario
Prepare cost measurement and reconciliation for AAR
Discuss requirements of cost management and control in context of case study scenario
Introduction
Task: Apply Role-Based Cost Control Principles to a Real World Scenario
Condition: You are a cost advisor technician with access to all regulations/course handouts, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors
Standard: with at least 80% accuracy
Determine appropriate characteristics of cost measurement and control process for case study scenario
Prepare cost measurement and reconciliation for AAR
Discuss requirements of cost management and control in context of case study scenario
© Dale R. Geiger 2011

4. Call to Action: Ft Hood Campaign Plan for Improving Training Cost Effectiveness
Fort Hood 2011 Campaign Plan
Item P 1-2: “effectively and efficiently manage, synchronize and resource training”
This case exercise provides a hypothetical response to the III Corps’ strategic intent
It outlines a Battalion level role based process
Your tasks are to build and deliver the AARs for the various roles represented in training
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
Fort Hood 2011 Campaign Plan
Item P 1-2: “effectively and efficiently manage, synchronize and resource training.” (emphasis added). Efficient management of training is part of the Ft. Hood campaign plan.
This case exercise provides a hypothetical response to the III Corps’ strategic intent
It outlines a Battalion level role based process.
Your tasks are to build and deliver the AARs for the various roles represented in training. The next few slides give pertinent details of the case.

5. M1A2 Abrams Main Battle Tank
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
If students are unfamiliar with the M1A2 Abrams you may wish to show the video
© Dale R. Geiger 2011

6. M1A2 Abrams Main Battle Tank
The main armament is the 120mm M256 smoothbore gun. The 120mm gun fires the following ammunition: the M865 TPCSDS-T and M831 TP-T training rounds, the M8300 HEAT-MP-T and the M829 APFSDS-T which includes a depleted uranium penetrator.
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
Some details about the M1A2 Abrams: The main armament is the 120mm M256 smoothbore gun. The 120mm gun fires the following ammunition: the M865 TPCSDS-T and M831 TP-T training rounds, the M8300 HEAT-MP-T and the M829 APFSDS-T which includes a depleted uranium penetrator. How much do you think it costs to train a battalion on this equipment? What costs are involved? We will look at this in more detail in this case and see if our assumptions and estimates are close.
© Dale R. Geiger 2011

7. Starting Point: Commander’s Intent
Develop an intent statement for your Battalion M1A2 main gun qualification training that meets the Corps’ intent
Make sure you address the two key goals of AAR processes:
Understanding the costs of their mission
Driving continuous improvement in cost effectiveness
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
[This is a class exercise.]
Develop an intent statement for your Battalion M1A2 main gun qualification training that meets the Corps’ intent. Remember that commander’s intent gives overarching guidance for all subordinate levels of leadership. Missions and mission-essential tasks are based on commander’s intent.
Make sure you address the two key goals of AAR processes:
Understanding the costs of their mission. How would you incorporate this into the commander’s intent? (language like “cost effective”, “efficient”, or “resource-informed decision” might be appropriate.)
Driving continuous improvement in cost effectiveness.
[Write the commander’s intent on the board. The class should agree on the wording and “own” the statement.]

8. Design Issues to Consider: How Often Should this Review Occur?
Remember the frequency issues:
The cost of the control process is the sum of the measurement cost and the process cost
More frequent meetings increase both
Should the training costs be review be:
Event driven (after every training event?)
Daily? Weekly? Monthly? Quarterly?
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
Let’s review the 4 dimensions of cost measurement: frequency, scope, flavor, and fullness.
We’ll start with frequency. How often should this review occur?
Remember the frequency issues:
The cost of the control process is the sum of the measurement cost and the process cost
More frequent meetings increase both. More measurements mean more cost; more after action review meetings mean more cost.
We need to ask ourselves, “Should the training costs be review be:
Event driven (after every training event?)
Daily? Weekly? Monthly? Quarterly?”
(If the training occurs at regular intervals, such as monthly or quarterly, it might make sense to include it as part of the regular AAR. If it occurs at irregular intervals or only once or twice a year, it might make more sense to hold a special AAR after each training event.)

9. Design Issues to Consider: What Costs Should be Measured?
Remember scope issues
There is a point where the cost of greater detail exceeds the value of greater detail
The goal is to reasonably approximate the cost of things that matter
Choices:
Soldier, Squad, Platoon, Company, Battalion
The “significant few” cost elements
The “trivial many” cost elements
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
Next let’s consider scope. Remember that with scope, there is a point where the cost of greater detail exceeds the value of greater detail. The goal is to reasonably approximate the cost of things that matter
Choices. Should the scope of our measurement be at a:
Soldier level (cost to train one soldier)? Squad level (cost to train one squad)? Platoon, Company, or Battalion level? What level is useful to leadership?
The “significant few” cost elements. Which cost elements should be measured directly or in detail?
The “trivial many” cost elements. Which should be allocated or aggregated together?

10. Design Issues to be Considered: What Types of Costs Should be Included?
Remember cost flavor issues:
Different cost views exist to fill different intelligence need
What cost view provides best intelligence in support of Commander’s Intent?
Choices:
Controllable vs. Non-controllable
Total vs. Incremental
Fixed/Variable vs. Direct/Indirect
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
Next let’s consider flavor. Remember cost flavor issues:
Different cost views exist to fill different intelligence need
What cost view provides best intelligence in support of Commander’s Intent?
Choices:
Controllable vs. non-controllable. Usually controllable cost views are more useful, although sometimes it can be surprising to leaders/managers to find that decisions they make can affect so-called non-controllable costs.
Total vs. incremental. Total costs give a bigger picture view. Incremental costs focus leaders/managers on the changes in costs as a result of a single decision.
Fixed/Variable vs. Direct/Indirect. Fixed/Variable views may be useful when leadership is focused on units of output. Direct/Indirect views may be more useful when looking at core function/support function roles.

11. Design Issues to be Considers: How Full Should Cost be?
Remember fullness issues:
Cost considerations must be bounded to exclude elements that don’t support goal
Example: every cost in the Army could include an allocation from the Commander in Chief if truly “full”
Choices:
Allocations from Brigade, Division, Corps, etc.
Allocations from personnel, resource management, chaplain, etc.
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
Next we will consider cost fullness. The main issue related to fullness is that cost considerations must be bounded to exclude elements that don’t support goal.
Example, every cost in the Army could include an allocation from the Commander in Chief if truly “full”. But, is that useful? Remember, we want to measure costs “that matter”. What level of fullness matters according to our commander’s intent?
Choices:
Allocations from Brigade, Division, Corps, etc.
Allocations from personnel, resource management, chaplain, etc.
The issue here is really relevance. What costs could potentially change as a result of our decisions?

12. Potentially Key Support and Consumable Cost Elements for Training
The following is a list of major training costs
Soldiers military pay
Range: personnel, targets, power, etc.
Class I: food, food preparation, delivery
Class III: petroleum, oil, lubricants
Class V: ammunition acquisition and issue
Class IX: maintenance: operator level, organization level, depot level
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
The following is a list of major training costs
Soldiers military pay
Range: personnel, targets, power, etc.
Class I: food, food preparation, delivery
Class III: petroleum, oil, lubricants
Class V: ammunition acquisition and issue
Class IX: maintenance: operator level, organization level, depot level

13. Who Should Speak for the Cost Elements
Who Should Speak for the Cost Elements? Defining the Cost Chain of Command
The focus of Commander’s Intent is on the Battalion Commander
Think of the Battalion CO as the customer of the process
Who should the Battalion Commander assign the role to speak for each cost element?
These will be the presenters at the cost AAR
This is the subordinate Cost Chain of Command
Activity Step 1 Determine appropriate characteristics of cost measurement and control process for case study scenario
The focus of Commander’s Intent is on the Battalion Commander
Think of the Battalion CO as the customer of the process
Who should the Battalion Commander assign the role to speak for each cost element? (Cost elements are those listed on the previous slide: Soldiers, range, food, fuel/oil, ammunition, equipment maintenance. Who should be responsible to the Battalion Commander for each of these cost elements?)
These will be the presenters at the cost AAR
This is the subordinate Cost Chain of Command. This follows the role-based model, since these subordinate relationships follow neither the organizational chain of command nor the budgetary structure of the organization. They are strictly based on the roles of support functions and core mission functions.

14. Learning Check
How does the use of the cost information affect the flavor of cost measurement?
How should reporting roles be assigned?
Q. How does the use of the cost information affect the flavor of cost measurement? A. In general, fixed/variable views of cost are more suitable when looking at units of output. Direct/Indirect views are more likely to reflect the core mission and support functions that are the focus in role-based cost management and control.
Q. How should reporting roles be assigned? The senior leader who is the “customer” of the support services should assign reporting roles to subordinate leaders responsible for each of the major cost elements.
© Dale R. Geiger 2011

15. Case A Let’s start with a relatively simple case:
Frequency After each training event
Scope Class III, V, and IX only
Flavor Direct cost
Fullness No allocation of higher HQ No allocation of support
Simple measurement process assumptions:
Class III and IX cost calculated as actual tank miles at FORCES estimate of $/mile
Class V cost calculated as actual main gun rounds expended at cost published in FORCES (use CTG 120MM TANK TP-T M831A1)
Activity Step 2 Prepare cost measurement and reconciliation for AAR
© Dale R. Geiger 2011

16. Using FORCES Model www.osmisweb.army.mil
Tank cost per mile:
Go tab CFH Operating Tempo/Flying Costs
Select Replenishment Parts & Fuel Cost by LIN
Select T13305-TANK COMBAT 120MM M1A2
Ammo cost per round
Go to tab CFH Unit Support Costs
Select Ammo and Missile Unit Cost from menu
Select 1315C784-CTG 120MM TANK TP-T M831A1
Activity Step 2 Prepare cost measurement and reconciliation for AAR
© Dale R. Geiger 2011

17. CFH tab
Tank cost per mile = $288.37
© Dale R. Geiger 2011

18. CFH tab
Ammo cost per round = $708.00
© Dale R. Geiger 2011

19. Case A Data: This Training Event
44 tanks drove 20 miles to the range, 5 miles on the range and 20 miles returning
Each tank expended its allotment of 10 rounds
Performance: qualification requires 7 bulls eyes
30 tanks qualified with first 7 rounds
10 tanks qualified on the 8th round
2 tanks qualified on the 9th round
2 tanks qualified on the 10th round
Activity Step 2 Prepare cost measurement and reconciliation for AAR
This training event
44 tanks drove 20 miles to the range, 5 miles on the range and 20 miles returning
Each tank expended its allotment of 10 rounds
Performance: qualification requires 7 bulls eyes
30 tanks qualified with first 7 rounds
10 tanks qualified on the 8th round
2 tanks qualified on the 9th round
2 tanks qualified on the 10th round
© Dale R. Geiger 2011

20. Case A Data: Last Training Event
The last training event
42 tanks drove 20 miles to the range, 10 miles on the range and 20 miles returning
Each tank expended its allotment of 10 rounds
Performance: qualification requires 7 bulls eyes
25 tanks qualified with first 7 rounds
10 tanks qualified on the 8th round
5 tanks qualified on the 9th round
1 tank qualified on the 10th round
Activity Step 2 Prepare cost measurement and reconciliation for AAR
The last training event
42 tanks drove 20 miles to the range, 10 miles on the range and 20 miles returning
Each tank expended its allotment of 10 rounds
Performance: qualification requires 7 bulls eyes
25 tanks qualified with first 7 rounds
10 tanks qualified on the 8th round
5 tanks qualified on the 9th round
1 tank qualified on the 10th round (one tank did not qualify).
© Dale R. Geiger 2011

21. Individual Exercise Requirement
The AAR presentation has been assigned to you as the Brigade S-4
Prepare your presentation:
Showing and explaining costs and performance compared to expectation (prior training event)
Several suggestions for continuous improvement
(One hint: look up cost per mile for heavy equipment transporter T59048-TRUCK TRACTR HET M1070)
Activity Step 2 Prepare cost measurement and reconciliation for AAR
The AAR presentation has been assigned to you as the Brigade S-4
Prepare your presentation:
Showing and explaining costs and performance compared to expectation
Several suggestions for continuous improvement
(One hint: look up cost per mile for heavy equipment transporter T59048-TRUCK TRACTR HET M1070)
[Give the students minutes to prepare the reconciliation and suggestions for continuous improvement.]
© Dale R. Geiger 2011

22. Student Presentations
[Select one or two students to present results. One might present results for the tank mileage and another for the ammo rounds. Solicit suggestions for improvement from all students. See the following slides for solutions and continuous improvement suggestions.]
© Dale R. Geiger 2011

23. Teacher’s Notes: Both Training Events
last training event
per tank
tanks
cost per $K
miles to/from range 40 42
1680
288.37
484
miles on range 10
420
121
rounds per tank
708.00
297
903
qualifying rounds 7 25
175 8 80 9 5 45 1
did not qualify
320
227
Cost Data
Performance Data
this training event
per tank
tanks
cost per $K
miles to/from range 40 44
1760
288.37
508
miles on range 5
220 63
rounds per tank 10
440
708.00
312
882
qualifying rounds 7 30
210 8 80 9 2 18 20
did not qualify
328
232
Activity Step 2 Prepare cost measurement and reconciliation for AAR
[The instructor may wish to distribute these solution slides to the students after they have prepared their own analyses and reconciliations.]
In this analysis miles to and from the range and ammo rounds expended on the range are essentially variable costs associated with the number of tanks used in the training event. The total miles on the range are considered in total, not on a per-tank basis.
Notice that the total rounds needed to qualify 42 tanks in the prior training event was The rounds needed to qualify in the most recent event was 328.
© Dale R. Geiger 2011

24. Teacher’s Notes: Reconciliation$K
this training event
882
last training event
903
variance 20
reconciliation
2 more tanks firing
(14)
2 more tanks to range
(23)
fewer miles on range 58
Activity Step 2 Prepare cost measurement and reconciliation for AAR
Remember that it is generally the ACE that prepares the cost comparison portion of the report and the leader who is responsible for the explanation.
© Dale R. Geiger 2011

25. Teacher’s Notes: Performance
performance: cum min rounds to qualify
last time
cum
this time 7
59.5%
68.2% 8
23.8%
83.3%
22.7%
90.9% 9
11.9%
95.2%
4.5%
95.5% 10
2.4%
97.6%
100.0%
dnq
0.0%
Activity Step 2 Prepare cost measurement and reconciliation for AAR
The cost figures alone don’t tell the whole story. In both training events, all tanks expended all rounds, even if they qualified after the first seven. In the second event, nearly 70% of the tanks qualified with the first seven rounds, an improvement over the 60% that qualified in seven rounds the first training event. Additionally, in the second training event, all 44 tanks qualified, whereas in the prior event one tank did not qualify. Notice that with each round the cumulative percentage of tanks qualified is higher than last time. Is there a way for this performance improvement to be reflected in the cost?
© Dale R. Geiger 2011

26. Teacher’s Notes: Performance
Cumulative Minimum Rounds to Qualify
This Event
Last Event
Activity Step 2 Prepare cost measurement and reconciliation for AAR
This is a graphic depiction of the numbers on the prior slide. The purple line shows the most recent training event, the red shows the prior event.
All tanks qualified in the second event, and they qualified in fewer rounds on average.
© Dale R. Geiger 2011

27. Teacher’s Notes: Potential Savings
Use heavy equipment transporters (HETs) to move tanks to and from the range
potential savings
HETs cost per mile
6.17
tank cost per mile
288.37
savings/mile from HETs
282.2
miles to/from range
1760
savings from HETs $K
497
Activity Step 2 Prepare cost measurement and reconciliation for AAR
Suggested continuous improvement initiative:
Use heavy equipment transporters (HETs) to move tanks to and from the range. The cost per mile is much less than the cost per tank mile. This way the expensive tank miles can be used in training on the range. This potentially saves $497K.
© Dale R. Geiger 2011

28. Teacher’s Notes: Potential Savings
Return rounds not needed for qualification
potential savings
rounds fired
440
rounds needed
328
rounds over need
112
cost per round
708.00
savings from returns $K 79
Activity Step 2 Prepare cost measurement and reconciliation for AAR
Another continuous improvement initiative is to return rounds not needed for qualification. Once the tank qualifies they will not fire anymore rounds. This would potentially save $79K.
© Dale R. Geiger 2011

29. Case B: A More Complex Scenario
It is possible to make the training AAR scenario much more realistic and complex
First, let’s consider the four requirements for cost control
Leadership
Staff
Process
Measurement
How might each work in this scenario?
Activity Step 3 Discuss requirements of cost management and control in context of case study scenario
It is possible to make the training AAR scenario much more realistic and complex
First, let’s consider the four requirements for cost control
Leadership
Staff
Process
Measurement
How might each work in this scenario?
© Dale R. Geiger 2011

30. Requirement: Leadership
Battalion Commanders and Deputy Brigade Commander drive the AAR
Interact with support providers who:
Explain cost and performance compared to expectations
Develop continuous improvement initiatives that improve cost and performance
Activity Step 3 Discuss requirements of cost management and control in context of case study scenario
Battalion Commanders and Deputy Brigade Commander drive the AAR. The are core function leaders and the customers of the support services.
Interact with support providers who:
Explain cost and performance compared to expectations. So far we have only looked at the cost of tank miles and ammo rounds. If you recall there were other elements of cost mentioned at the beginning of this case: soldier cost, range cost, meals, and maintenance. Each of these would require analysis and comparison to expectation.
Develop continuous improvement initiatives that improve cost and performance – as each element of cost is explained, opportunities for improvement should become apparent. It is up to leaders to drive this process.

31. Requirement: Staff Support
The Brigade Assistant to the Commander for the Enterprise (ACE)
Supports Brigade and Battalion leadership as well as subordinates with
Credible cost measurements, analyses, insights
Constructive questions, suggestions, and ideas
Reports directly to Division ACE
Works for Brigade Deputy Commander
Activity Step 3 Discuss requirements of cost management and control in context of case study scenario
The Brigade should have an ACE: Assistant to the Commander for the Enterprise
Supports Brigade and Battalion leadership as well as subordinates with
Credible cost measurements, analyses, insights. The ACE is the person who helps to define the scope, flavor and fullness of cost measurement.
Constructive questions, suggestions, and ideas
Reports directly to Division ACE
Works for Brigade Deputy Commander

32. Requirement: Process
The Cost and Performance After Action Review (CPAAR)
Occurs monthly, quarterly or as needed
Brigade DCO establishes meeting schedule
Brigade ACE defines meeting format
Providers present cost and performance by Battalion
Battalion COs critique presentations and continuous improvement results
Activity Step 3 Discuss requirements of cost management and control in context of case study scenario
The Cost and Performance After Action Review (CPAAR)
Occurs monthly, quarterly or as needed. If training events occur less frequently than that, the AAR could be on a per-event basis.
Brigade DCO establishes meeting schedule
Brigade ACE defines meeting format – and specifies the elements of cost to be presented.
Providers present cost and performance by Battalion
Battalion COs critique presentations and continuous improvement results

33. Requirement: Measurement
Providers (with the help of the ACE) develop suggested measures and methods
Leaders approve measures and methods
Measurement goals
Credibility: actionable, understandable
Usefulness: continuous mission improvement
Affordability: perfect is too expensive
Activity Step 3 Discuss requirements of cost management and control in context of case study scenario
Providers (with the help of the ACE) develop suggested measures and methods
Leaders approve measures and methods
Measurement goals
Credibility: actionable, understandable
Usefulness: continuous mission improvement
Affordability: perfect is too expensive

34. Learning Check What is the role of the ACE in staff support?
What is the role of the ACE in the AAR?
Q. What is the role of the ACE in staff support? A. Supports Brigade and Battalion leadership as well as subordinates with credible cost measurements, analyses and insights. Reports directly to Division ACE
Q. What is the role of the ACE in the AAR? A. Defines the meeting format. Helps develop measurements and methods for each support provider.
© Dale R. Geiger 2011

35. Case B: Expanded Complexity
Let’s evolve to a more complex scenario:
Frequency Quarterly training brief
Scope Class I, III, V, and IX (food, POL, ammo, maintenance)
Flavor Direct cost and indirect cost
Fullness No allocation of higher HQ Garrison allocation of support
Additional measurement process assumptions:
Class I cost calculated from MRE cost per serving data: FORCES CFH Unit Support Cost  Subsistence Data
Garrison support costs for food handling, ammunition issuance and range management must be allocated
Activity Step 4 Role playing exercise
Let’s evolve to a more complex scenario:
Frequency Quarterly training brief
Scope Class I, III, V, and IX (food, POL, ammo, maintenance)
Flavor Direct cost and indirect cost
Fullness No allocation of higher HQ; Garrison allocation of support
Additional measurement process assumptions:
Class I cost calculated from MRE cost per serving data: FORCES CFH Unit Support Cost  Subsistence Data. Students should be comfortable with FORCES and will find that the cost per MRE is $7.23
Garrison support costs for food handling, ammunition issuance and range management must be allocated.
© Dale R. Geiger 2011

36. Case B: Expanding Complexity
Key Support Providers: i.e. AAR Presenters
Class I, III, V, IX Brigade S4
Range: Garrison Range Manager
Food Prep: Garrison Dining Facility Mgr
Ammo Issue: Garrison Ammo Supply Mgr
Activity Step 4 Role playing exercise
Key Support Providers: i.e. AAR Presenters
Class I, III, V, IX Brigade S4
Range: Garrison Range Manager
Food Prep: Garrison Dining Facility Mgr
Ammo Issue: Garrison Ammo Supply Mgr
Information about each of these areas of responsibility follows on the next several slides.

37. Garrison Support - Food
Food prep:
Manager estimates that 90% of her cost supports dining facilities and 10% support range ops
Total cost for last quarter was $420,000
Served 90,000 meals in dining facilities
Served 5,000 meals in field
Total cost for this quarter is $440,000
Served 95,000 meals in dining facilities
Served 4,000 meals in field
Activity Step 4 Role playing exercise
Food prep:
Manager estimates that 90% of her cost supports dining facilities and 10% support range ops
Total cost for last quarter was $420,000
Served 90,000 meals in dining facilities
Served 5,000 meals in field
Total cost for this quarter is $440,000
Served 95,000 meals in dining facilities
Served 4,000 meals in field
© Dale R. Geiger 2011

38. Garrison Support – ASP Ammunition Supply Point:
Manager estimates that 95% of cost supports ammo issuance and 5% supports ammo return
Total cost for last quarter were $120,000
Issued 5,000 main gun rounds
Returned 200 main gun rounds
Total cost for this quarter is $140,000
Issued 6,000 main gun rounds
Returned 300 main gun rounds
Activity Step 4 Role playing exercise
Ammunition Supply Point:
Manager estimates that 95% of cost supports ammo issuance and 5% supports ammo return
Total cost for last quarter were $120,000
Issued 5,000 main gun rounds
Returned 200 main gun rounds
Total cost for this quarter is $140,000
Issued 6,000 main gun rounds
Returned 300 main gun rounds
© Dale R. Geiger 2011

39. Garrison Support – Range Management
Manager suggests allocating range cost on the basis of range days reserved by units
Total cost for last quarter was $320,000
90 days were available for range usage
90 days were reserved for range usage by units
70 days were used by units
Total cost for this quarter is $310,000
60 days were used by units
Activity Step 4 Role playing exercise
Range Management:
Manager suggests allocating range cost on the basis of range days reserved by units
Total cost for last quarter was $320,000
90 days were available for range usage
90 days were reserved for range usage by units
70 days were used by units
Total cost for this quarter is $310,000
60 days were used by units
© Dale R. Geiger 2011

40. Case B: Additional Data Last Quarter
Last quarter training:
150 trips to and from range, 450 miles on range
Each tank expended its allotment of 10 rounds
Performance: qualification requires 7 bulls eyes
54% qualified with first 7 rounds
30% qualified on the 8th round
10% qualified on the 9th round
2% qualified on the 10th round
10 range days were reserved and 4 used
300 soldiers were fed four MREs each day
Activity Step 4 Role playing exercise
Last quarter training:
150 trips to and from range, 450 miles on range
Each tank expended its allotment of 10 rounds
Performance: qualification requires 7 bulls eyes
54% qualified with first 7 rounds
30% qualified on the 8th round
10% qualified on the 9th round
2% qualified on the 10th round
10 range days were reserved and 4 used
300 soldiers were fed four MREs each day
© Dale R. Geiger 2011

41. Case B: Additional Data this Quarter
This quarter training:
180 trips to and from range on HETs, 1080 miles on range
Each tank was issued 10 rounds and unneeded rounds were returned to the ASP
Performance: qualification requires 7 bulls eyes
50% qualified with first 7 rounds
30% qualified on the 8th round
10% qualified on the 9th round
10% qualified on the 10th round
8 range days were reserved and 5 used
320 soldiers were fed four MREs each day
Activity Step 4 Role playing exercise
This quarter training:
180 trips to and from range on HETs, 1080 miles on range
Each tank was issued 10 rounds and unneeded rounds were returned to the ASP
Performance: qualification requires 7 bulls eyes
50% qualified with first 7 rounds
30% qualified on the 8th round
10% qualified on the 9th round
10% qualified on the 10th round
8 range days were reserved and 5 used
320 soldiers were fed four MREs each day
© Dale R. Geiger 2011

42. Team Exercise Teams Assign Members as Follows:
Battalion CO – most senior
Brigade ACE – elected by group
Range MGR
DFAC MGR
ASP MGR
Brigade S4
Prepare AAR briefings for Range MGR, DFAC MGR, ASP MGR, and Brigade S4
Activity Step 4 Role playing exercise
Divide into teams. Since there are six roles for each team, ideally teams should have six members. It may be necessary for one or two students to serve dual roles.
Teams Assign Members as Follows:
Battalion CO – most senior
Brigade ACE – elected by group
Range MGR
DFAC MGR (dining facilities manager)
ASP MGR (ammo supply point manager)
Brigade S4
Prepare AAR briefings for Range MGR, DFAC MGR, ASP MGR, and Brigade S4

43. Team Presentations
© Dale R. Geiger 2011

44. AAR Briefings – Teacher’s Note
Last team’s Battalion CO (acting as Deputy Brigade Commander) and Brigade ACE (acting as Battalion CO) receive the AAR from the first team
First team’s Battalion CO and Brigade ACE receive the AAR from the second team, etc., etc.
(All team members including Battalion CO and ACE can help their team’s presenters answer questions)
Activity Step 4 Role playing exercise
Give the students minutes to prepare. Each team should then have 10 minutes to present. The Deputy Brigade Commander and Battalion CO will ask questions for the teams to answer.
Last team’s Battalion CO (acting as Deputy Brigade Commander) and Brigade ACE (acting as Battalion CO) receive the AAR from the first team. Battalion CO of one team presents summary report to “Deputy Brigade Commander” who was the Battalion CO of the prior team.
First team’s Battalion CO and Brigade ACE receive the AAR from the second team, etc., etc.
(All team members including Battalion CO and ACE can help their team’s presenters answer questions)
© Dale R. Geiger 2011

45. Teacher’s Note: Range MGR
last qtr
this qtr
var
cost $K
320
310
reserved days 90
cost per $K
3.6
3.4
battalion 10 8
range cost $K
35.6
27.6
8.0
potential savings
used days 4 5
reserved days 10 8
unneeded days 6 3
unneeded cost $K
21.3
10.3
Activity Step 4 Role playing exercise
Cost of range support is favorable this quarter because fewer days were reserved. Key points in this reconciliation are that days were reserved and not used. The cost factor here is that unused days wastes staff and other resources that could be used elsewhere. Reserving the range and not using it also prevents another unit (which might actually need the training) from using the range on that day.
© Dale R. Geiger 2011

46. Teacher’s Note: DFAC MGR
last qtr
this qtr
var
cost $K
420
440
10% range 42 44
meals
5000
4000
cost per meal
8.40
11.00
battalion
soldiers
300
320
days 4 5
meals at 4 per day
4800
6400
cost of meals
40.3
70.4
(30.1)
potential savings
bas per soldier day
8.48
soldiers
300
320
days 4 5
recoverable cost $K
10.2
13.6
Activity Step 4 Role playing exercise
Total cost of supporting meals is greater because there were more soldiers and more days.
Support for meals served out in the field is not free. Some of that cost could be offset by using the BAS (Basic Allowance for Subsistence) of $8.48 per day per soldier to cover support meals served in the field.
© Dale R. Geiger 2011

47. Teacher’s Note: ASP MGR
battalion
last qtr
this qtr
var
tanks
150
180
rounds issued 10
total rounds issued
1500
1800
cost of issues $K
34.2
39.9
(5.7)
last qtr
this qtr
cost $K
120.0
140.0
95% issuance $K
114.0
133.0
rounds issued
5000
6000
cost per issue
22.80
22.17
5% return $K
6.0
7.0
rounds returned
200
300
cost per return
30.00
23.33
tanks returning 3 90
rounds returned
270
tanks returning 2 54
108
tanks returning 1 18
total rounds returned
396
cost of returns $K
9.2
(9.2)
Activity Step 4 Role playing exercise
The variance for ammo issued is unfavorable because of more tanks and more training days. Since unneeded rounds were returned this quarter there is a cost of returning rounds which is unfavorable (more cost is bad). However, this offsets the considerable cost of the ammo itself, which is not included here (see next slide). This is only the cost of issuing and processing returns.
© Dale R. Geiger 2011

48. Teacher’s Note: Brigade S4
Class III POL IX Maint
last qtr
this qtr
var
tanks
150
180
miles to/from range 40
total miles to/from range
6000
cost per mile
288.37
tanks cost $K
1730.2
miles on range
450
1080
129.8
311.4
(181.7)
HETs
total miles
7200
6.17
HETs cost $K
0.0
44.4
(44.4)
Class I Food
last qtr
this qtr
var
soldiers
300
320
days 4 5
4 per
4800
6400
cost per meal
7.23
meal cost $K
34.7
46.3
(11.6)
Class V ammo
rounds issued
1500
1800
rounds returned
396
rounds used
1404
cost per round
708.00
ammo cost $K
1062.0
994.0
68.0
Activity Step 4 Role playing exercise
Cost of food is unfavorable due to more soldiers/more days.
Cost of Ammo is favorable due to returning rounds. This more than offsets the unfavorable variance for returns in the ammo supply point (previous slide).
Cost of tank miles to and from the range is favorable due to using HETs to transport the tanks. Cost of miles on range is unfavorable due to more tanks and more miles on range. However, all miles put on the tanks were training miles, and that is a good thing.
Cost of HETs is unfavorable, but is way more than offset by the savings from using the HETs to transport the tanks to the range.
© Dale R. Geiger 2011

49. Teacher’s Note: Summary$K
last qtr
this qtr
var
Class III IX to range
1730.2
44.4
1685.8
Class V Ammo
1062.0
994.0
68.0
Class III IX on range
129.8
311.4
(181.7)
DFAC cost
40.3
70.4
(30.1)
Range cost
35.6
27.6
8.0
Class I Food
34.7
46.3
(11.6)
ASP issues
34.2
39.9
(5.7)
ASP returns
0.0
9.2
(9.2)
3066.8
1543.3
1523.5
reconciliation
HET use
Return rounds plan
58.7
More miles on range
More soldier days
(41.6)
All other
2.3
Activity Step 4 Role playing exercise
This is the summary slide that the Battalion CO would present to the Deputy Brigade Commander. The top part of the slide summarizes the variances in each category.
The lower part of the slide shows the reconciliation of all costs. The net favorable is $1523.5K
© Dale R. Geiger 2011

50. Teacher’s Note: Performance
Cumulative Minimum Rounds to Qualify
This Event
Last Event
Activity Step 4 Role playing exercise
Activity Step 5 – Discussion and conclusions
This chart summarizes performance. While the costs were significantly less this quarter due to using HETs and returning unneeded rounds, the qualification rate was slower. However, all tanks did qualify this quarter, which was an improvement over last quarter where 2% of tanks did not qualify.
© Dale R. Geiger 2011

51. Case C – Individual Exercise
Add Military Pay for the Soldier days involved at an average cost of $65K per year and 250 work days per year
Discussion on materiality
How significant is Military Pay?
Activity Step 5 Practice problem
In this exercise you will take the information from the prior exercise and add to it the effects of military pay for the Soldier days involved, assuming an average cost of $65K per year and 250 work days per year
Discussion on materiality. How significant is Military Pay? Military pay is a very large expenditure in the Army, but since it is separately funded, most leaders/managers don’t consider it. It is not part of the budget for which they are held responsible. What is the cost per day per soldier? How significant is that in relation to the other costs incurred in the training exercises?
(Cost per day = $65K/250 days = $260/day * 320 soldiers * 5 days = $416K out of a total of $1523K other costs. It is the second biggest cost after ammo. If we ignore it, we will probably also ignore potential cost savings initiatives related to military pay. )
[Give the students minutes to prepare their slides. Have one or two present to the group]
© Dale R. Geiger 2011

52. Teacher’s Note: Case C Summary$K
last qtr
this qtr
var
Class III IX to range
1730.2
44.4
1685.8
Class V Ammo
1062.0
994.0
68.0
Mil pay
312.0
416.0
(104.0)
Class III IX on range
129.8
311.4
(181.7)
DFAC cost
40.3
70.4
(30.1)
Range cost
35.6
27.6
8.0
Class I Food
34.7
46.3
(11.6)
ASP issues
34.2
39.9
(5.7)
ASP returns
0.0
9.2
(9.2)
3378.8
1959.3
1419.5
reconciliation
HET use
Return rounds plan
58.7
More miles on range
More soldier days
(145.6)
All other
2.3
Mil Pay
last qtr
this qtr
var
soldiers
300
320
days 4 5
soldier days
1200
1600
cost per day
260
soldier cost $K
312.0
416.0
(104.0)
Activity Step 5 Practice problem
Notice that the cost of soldiers has an unfavorable variance, due to more soldiers AND more days of training. More soldier days also affects food cost and DFAC support cost, as reflected in the reconciliation at the lower right. Overall the variance is still $1.4 million favorable. Consider also that more training (in both days and range miles) was accomplished and all tanks qualified.
© Dale R. Geiger 2011

53. Cost Elements - Budget
Soldier Cost: military manpower appropriation managed at Department of the Army level
Range Cost: Garrison Ranges (IMCOM)
Class I: Garrison DFACs (IMCOM)
Class III: Brigade budget
Class V: appropriation managed at Army level ammunition issuance is Garrison ASPs (IMCOM)
Class IX: split between brigade, Garrison DOLs (IMCOM) and OMA appropriation (DA)
Discussion and conclusions
This list of cost elements and their budgetary sources typifies the Role-based cost control scenario. The organization and budgetary relationships do not reflect the core mission and supporting roles. These costs are recorded in multiple different “stovepipes” and only the virtual cost chain of command created by role-based cost control will reflect the true core mission/support relationships.
Soldier Cost: military manpower appropriation managed at Department of the Army level
Range Cost: Garrison Ranges (IMCOM)
Class I: Garrison DFACs (IMCOM)
Class III: Brigade budget
Class V: appropriation managed at Army level; ammunition issuance is Garrison ASPs (IMCOM)
Class IX: split between brigade, Garrison DOLs (IMCOM) and OMA appropriation (DA)

54. Conclusion: Budget vs. Cost Views
Mil Pay $
Ammo $
Food $
Army
Battalion
AAR
FORSCOM
IMCOM
Brigade S1
Range Manager
DFAC Manager
Corps
Region
Range $
Ammo Issue $
DFAC $
Maint $
Discussion and conclusions
The diagram on the left shows the org chart and budgetary relationships. The diagram on the right shows the core mission/support relationships. This is the type of virtual cost chain of command that the cost management process creates. It all centers on the AAR.
Brigade S4
Ammo SP Manager
Brigade S4
Division
Garrison
POL $
Repair $
Brigade
Battalion

55. Conclusion: Budget vs. Cost Crosswalk
Mil Pay $
Ammo $
Food $
Army
Battalion
AAR
FORSCOM
IMCOM
Brigade S1
Range Manager
DFAC Manager
Corps
Region
Mil Pay $
Range $
DFAC $
Range $
Ammo Issue $
DFAC $
Maint $
Discussion and conclusions
This chart shows the connections between budget/funding source and the actual consumption of resources. The network of arrows is complex. While it is possible that in the future, GFEBS will reflect these types of cost relationships, it is not necessary to build a cost accounting system to do this. Internal cost allocations that give a “reasonably right” reflection of the consumption of resources will do far more for motivating desired behaviors than a “precisely wrong” measurement that serves external reporting purposes.
Brigade S4
Ammo SP Manager
Brigade S4
Division
Garrison
Maint $ Repair $ POL $
Ammo Issue $
Food $ Ammo $
POL $
Repair $
Brigade
Battalion

56. Conclusions
Role based cost management and control offers numerous opportunities to engage
In improving the cost effectiveness of complex processes
With many different types of cost
With many different supporting organizations and accountable personnel
Discussion and Conclusions
Role based cost management and control offers numerous opportunities to engage
In improving the cost effectiveness of complex processes
With many different types of cost
With many different supporting organizations and accountable personnel
How can role based cost management improve the cost effectiveness of complex processes? (By highlighting the consumption of resources by core mission functions. This allows the leaders of the core mission functions to have a better understanding of how their decisions affect the total costs incurred in other organizations. Then the leaders can begin to make decisions that are better from an Army enterprise point of view.)
[Note: Click on the thumbnail to view the video.]
© Dale R. Geiger 2011