In groups of three, take the role of finance director, production director and sales director in a company manufacturing pressure die castings, gravity die castings and sand castings. The three types of casting are manufactured in different locations but each is no more than 20 miles from either of the other locations. All castings are brought to central premises for finishing treatment. The costs of materials are around 56% of final sales price and the costs of labor are around 30% of sales price.

The finance director has been asked to explain to the production director and the sales director the effect of measuring profit using variable costing rather than absorption costing. It is important to keep separate the profit on each of the three product types. The finance director should provide a short explanation and the production director and sales director should ask questions about anything which is unclear or omitted from the explanation. After the discussion is completed (say, 30 minutes in all) the group should make a presentation to the class outlining the nature of their discussion and the conclusion reached as to how profit for each product should be measured.