A chair manufacturer hires its assembly-line labor for $30 an hour and calculates the rental cost of its machinery is $15 per hour

Since labor and machine could be combined in any way to produce the same amount of chair, they are perfect substitutes in the production process. In this case, it is cost effective to use whichever input that is cheaper (with a hourly rate). Since each labor cost $30 per hour and machinery costs $15 per hour, it is therefore optimal to use all machines and no labor.

The current combination is not minimizing costs. Current total cost = 3*30 + 15 = $105. If the manufacturer instead uses only machinery, and it would need 4 hours of machinery to produce 1 chair, but the cost is 4*10 = $40, which is lower than the current cost.