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Auburn Furniture Company makes a variety of wood furniture for the home and office. The company uses a standard costing system for its manufacturing costs. During a recent unexpected surge in demand, the company decided to use temporary employees from a local employment agency. The company used the temporary employees for two months, after which managers stopped using them. There were many complaints from production foremen that the temporary employees were not very efficient. Additionally, customer service staff noted that during the two month time period when the temporary employees were working there was an increase in the number of units that had to be reworked and the number of units being returned by customers.
Management is considering filing a lawsuit against the temporary employment company for providing workers who did not perform at the level of regular employees as had been promised by the employment company. Before filing the lawsuit, management would like to have some information about the possible damages in the case.
Question 1: What accounting and other information would you look at to assist management in evaluating possible damages?
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