The new artisanal greenhouse would require 700 empty wine bottles be embedded in a frame made of clay and straw. The builder, a man with too much time on his hands, had determined that each time a bottle was added to the structure it would take 30 minutes of labor at $7.50 per hour in the blazing sun. An activity-based costing of the entire artisanal greenhouse revealed that the total labor cost would be:
Select one:
a. $2,525.
b. $2,850.
c. $2,625.
d. $2,450.

Activity-based costing is a technique for allocating overhead and indirect costs, such salaries and utilities, to goods and services. The ABC system of cost accounting is built around activities, which are defined as any occasion, project, or task with a clear objective. An organization's activities are identified using the activity-based costing approach, which then allocates the cost of each activity to each product and service depending on how much of each is actually consumed. In contrast to traditional costing, this model assigns greater indirect costs to direct costs. Examples include allocating the amount of space needed for each product and the factory's rent as well as the company's maintenance costs.

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