"Hi Mr. Homework!, YES, we have Mr. Perry! Hurray, Grandpa!..."
I know kids will sometimes say things without really thinking about it. In some cases it may be unintentional, ignorance or cultural differences about what "is" and "is not" acceptable when addressing adults. I even know of one substitute teacher who prefers to be addressed as "grandpa" by his students.
The class must have realized from my body language that it wasn't an acceptable nickname by me as the class went suddenly quite. I've been in this class several times this year and I know it was not intentional.
I could have ignored the comment but the initial class reaction was much the same as mine so I felt I had to address the issue. Without singling out any particular individual, I addressed the class:
"There are only four people living on this planet that can call me 'grandpa' and none of them are in this classroom. So let's get to work and have a fun rest of the day"
As we finished the morning lessons and the kids filed out for lunch, one boy came back into the room and apologized for his outburst. He meant no disrespect but immediately realized it didn't come across that way. I thanked him for coming back to apologize and sent him on his way.
It takes guts to face up to your own mistakes. I think this kid will do 'ok' in the future.