A production department is allocated costs from the maintenance department based on the number of maintenance hours used. The maintenance costs are allocated at a rate of

€20 per hour, which includes both variable and fixed costs. The variable cost per hour is

€12. The maintenance department has plenty of excess capacity. The benefits to the production department of having maintenance service are estimated as follows:

What level of maintenance will the production department choose if the production department is allocated maintenance costs at €20 per hour? What level of maintenance benefits the entire organization the most?

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Number of Hours 1,000 2,000 3,000 4,000 Expected Benefits 30,000 45,000 58,000 65,000