EXERCISE 7-1 (15 MINUTES) (NOTE

2. Under variable costing, only the variable manufacturing costs are in-

cluded in product costs.

Direct materials ... Rp100

Direct labor ... 320

Variable manufacturing overhead ... 40

Unit product cost ... Rp460

Note that selling and administrative expenses are not treated as product

costs under either absorption or variable costing; that is, they are not

included in the costs that are inventoried. These expenses are always

treated as period costs and are charged against the current period’s

revenue.

© The McGraw-Hill Companies, Inc., 2006. All rights reserved.

Solutions Manual, Chapter 7 349