Suppose that a constraint for assembly time has a shadow price of $50/hour for 15 hours in either direction and that all available assembly time is currently used (would require overtime to do more)
If the salary of workers is $30 and they receive 50% extra pay for overtime what should management do?
Reducing assembly time would save $30/hour but would cost $50/hour in lost profits.
Doing nothing would not change profits.
Increasing assembly time would cost an extra $45 per hour but increase profits by $50/hour. Thus management should be willing to pay for 15 hours of overtime and perhaps should look into increasing base assembly time capacity in the future.
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