Gourmet Fast Foods produces and sells many products in each of its 35 different product lines. Occasionally, a product or an entire product line is dropped because it ceases to be profitable. The company does not have a formalized program for reviewing its products on a regular basis to identify products that should be eliminated.

At a recent meeting of Gourmet’s top management, the head of operations stated that several products or possibly an entire product line were currently unprofitable. After considerable discussion, management decided that Gourmet should establish a formalized product discontinuance program. The purpose of the program would be to review the company’s individual products and product lines on a regular and ongoing basis to identify problem areas.

The vice president of finance proposed that a person be assigned to the program on a full-time basis. This person would work closely with the marketing and accounting departments to determine the factors that indicate when a product’s importance is declining and to gather the information that would be required to evaluate whether a product or product line should be discontinued.

REQUIRED

A. Identify several business risks and explain how these risks prevent managers of Gourmet Fast Foods from knowing for sure when a product or product line should be discontinued.

B. What factors might suggest that a product or product line is deteriorating in importance to an organization? List as many factors as you can.

C. If you were assigned to this position, what information would you want from the accounting system?

D. If you were assigned to this position, would you want any information other than that produced by the accounting system? If so, what type of information would be useful, and where would you be likely to obtain it?

E. List several benefits of assigning an employee full-time responsibility for a product discontinuance program.

F. If you were assigned to this position, describe the steps you would take as you analyze a given product.