Case 2 – Peeps – Spring 2017 – Acct 525
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.
Assume it is October 2016 and you are an accountant for the company. The plant manager asks you “what standard costing variances could be impacted by the strike and negotiations?” Answer the plant manager in memo format giving the impact assuming at least two possible outcomes of the negotiations.
Hint: Your assumptions about the following two questions will impact your answers on the variances.
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?
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?
Your memo should include the following segments: 1) Begin the memo by briefly restating the problem/opportunity; 2) Answer the question asked by the plant manager (provide the assumptions you made to arrive at your answer); 3) Compare at least two possible outcomes for the negotiations.
Your report should be a minimum of two pages in memorandum form. Memo templates are available in Word (while in Word click on F1 and search for memo). Samples of previous student memos are available under the ‘course content’ tab. Avoid plagiarism; use your own words or cite the source of the information if you are quoting someone else. Points will be deducted for poor grammar or spelling.
To receive credit for the assignment, submit the case in a single file as an attached Word or Open Source document under the assignment section of Blackboard. To attach a file, click on attachments under the “submission” portion of the assignment. Be sure to check the box on the ‘Plagiarism Tools’ line that agree to submit your paper for checks.