How would the strike at Just Born, the maker of Peeps, impact its standard costing variances?

Just Born Quality Confections (Just Born) makes marshmallow Peeps, Mike and Ikes, Hot Tamales, and other candies. The company has approximately 600 employees and is privately-held. Its headquarters and Peeps factory are in Bethlehem, Pennsylvania.  In September 2016, the factory employees represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union of America Local 6 went on strike and walked off the job. Nearly 400 workers at Just Born are members of this union.

The union employees returned to work in early October after being on strike for about a month. During the strike, the company did hire 56 replacement workers, so not everyone was able to return to their old job after the strike. Also, during the strike, some employees did cross the picket line to work, so Just Born had a mixture of experienced and new employees in the factory during the strike.

Fall is Just Born’s busiest time of the year. Production is being ramped up to meet the demand for Peeps during the Easter season.

The negotiations have not been finalized and the possibility of a return to the strike remains. The main sticking point is the company pension. Just Born wants new employees to participate in a 401(k) plan rather than the company’s pension plan. Just Born has stated the current pension plan will stay the same for all current employees, but the union disagrees. The other point of disagreement is the amount of pay increases for employees.

Questions

1. Do you think that factory wages in total during the strike would be higher, lower, or the same throughout the strike and negotiations as compared to earlier in the year? Explain.
2. Do you think that factory wages per hour during the strike would be higher, lower, or the same throughout the strike and negotiations as compared to earlier in the year? Explain.
3. What standard costing variances could be impacted by the strike and negotiations? Explain.

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

• Student handout (pdf) (word) (contains entire blog posting + discussion questions)
• PowerPoint file (brief article overview + discussion questions)

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