PLACE frosting in medium microwave-safe bowl. Microwave on HIGH 30 seconds. Stir until smooth. Dip top third of 1 doughnut into frosting to coat, allowing excess frosting to drip off doughnut. Sprinkle candy bits from frosting lightly over frosting. Place doughnut on bottom tier of cupcake stand, frosting side up. Repeat to fill bottom tier with a total of 8 doughnuts. If frosting thickens, microwave additional 5 to 10 seconds until desired consistency when stirred.
REPEAT with 7 more doughnuts, arranging in a circular layer, staggering position between doughnuts, directly on top of first tier. Repeat with 4 doughnuts; place on middle tier of cupcake stand. Repeat with 4 more doughnuts; arrange in a staggered position directly on top of middle tier doughnuts.
FROST 1 additional doughnut. Place on top tier of cupcake stand. Place another unfrosted doughnut, standing on side edge, in center of frosted doughnut. Microwave remaining frosting on HIGH 10 seconds. Stir. Drizzle over both sides of top doughnut and entire doughnut tree. Sprinkle tree evenly with remaining candy bits. Insert candles or decorative picks into doughnut tree, if desired.