Consider the following simple assembly process:

Raw Material 3 min/unit 5 min/unit 2 min/unit Finished Goods

The numbers below each step refer to the time necessary to process one unit of the product at that step.

The process is staffed by three operators with one operator assigned to each of the three steps. Assume no set ups are required, processing times are constant and no Work in Process (WIP) is permitted beyond that actually being worked on at each process step (i.e., there are no buffers between process steps).

c) Each operator receives regular wages of $12/hour for the first 8 hours, and overtime wages of $18/hour for any additional time. Twelve hours per day is the maximum work time permitted. A finished unit sells for $10 while its direct material cost is $6/unit. Does it pay to use overtime under this cost structure (assuming sufficient demand exists)?