Question

30,000 XCELL union member employees that were part of its wireline business went on strike. The union members were upset about XCELL jobs being transferred overseas and overall cost cutting measures being implemented while the company was posting significant profits.

Since XCELL provides much needed home and business telephone service, the company had to bring in a temporary workforce to fill the roles of the striking workers. Given the magnitude of the temporary workforce, you can imagine the labor costs involved in such an exercise for XCELL. Assuming the striking workers were not entitled to pay when they weren't working, how do you expect that the strike will impact the company's wage expense? What standard cost variances might be impacted by this event?

Answer 1

The wage expenses of the company will be reduced due to wages not paid to regular workers whom are in strike.

But at the same time considering the wages paid to temporary work force the wages expense may be increased when compared to existing wage payment.

Variances such Labour cost, labour rate variances are favourable due to wages not paid regular strike workers. But this favourable variances are affseted by wages paid to temporary workers.

Overall the variances may be favourable or adverse depends on the wages paid to temporary workers.