Bundt Foods Company produces and sells many products in each of its 35 different product lines. From time to time 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 those products which should be eliminated.

At a recent meeting of Bundt Foods' top management, one person stated that there probably were several products or possibly a product line which was unprofitable or producing an unsatisfactory return on investment. After considerable discussion, management decided that Bundt foods 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 on-going basis to identify problem areas.

The vice president of finance has 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 in determining (1) the factors which indicate when a product's importance is declining and (2) the underlying data that would be required in evaluating whether a product line should be discontinued.

{Required:}

(a) Identify and explain briefly the benefits, other than the identification of unprofitable products or product lines, Bundt Foods Company can derive from a formalized product discontinuance program.

(b) In developing Bundt Foods Company's product discontinuance program:
(1) Identify the factors which would indicate that a product's or product line's importance is diminishing.
(2) Identify the data which the accounting department would be able to provide which would be useful in evaluating a product or product line.