P4-4A Polzin Corporation produces two grades of wine from grapes that it buys from

California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost,

high-volume product called CoolDay. It sells this in 600,000 5-liter jugs. Polzin also produces

and sells roughly 300,000 liters per year of a low-volume, high-cost product called

LiteMist. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay product

has not been as profitable as LiteMist. Management is considering dropping the inexpensive

CoolDay line so it can focus more attention on the LiteMist product. The LiteMist

product already demands considerably more attention than the CoolDay line.

Greg Kagen, president and founder of Polzin, is skeptical about this idea. He points

out that for many decades the company produced only the CoolDay line, and that it was

always quite profitable. It wasn