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Everclean Company cleans draperies. It charges $75 to clean a full-size drape, and its variable and fixed costs are $45 per drape and $8,000 per year, respectively. Given this data, approximately how many drapes must the company clean to break even?
Conversion Cost
The sum of direct labor and manufacturing overhead costs, representing the expense to convert raw materials into finished products.
Average Cost Method
An inventory costing method that calculates the cost of goods sold based on the average cost of all similar items in inventory.
Equivalent Unit
A measure used in cost accounting to express the amount of work done by manufacturers on units that are partially completed at the end of an accounting period.
Applied Overhead
The portion of overhead costs allocated to specific jobs or departments based on a predetermined rate.
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