It takes a shoemaker 15 minutes to produce a pair of shoes. Each shoemaker works 150 hours per month, plus up to 40 hours per month overtime. A shoemaker is paid a regular salary of $2 000 per month, plus $50 per hour for overtime.
At the beginning of each month, Cheap Shoes NZ can either hire or fire shoemakers. It costs them $1500 to hire a shoemaker and $1900 to fire a shoemaker.
The monthly holding cost per pair of shoes is 3% of the cost of producing a pair of shoes with regular-time labour. The raw materials in a pair of shoes cost $20.
At the beginning of month 1, Cheap Shoes NZ has 13 shoemakers.
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