Consider the Following Short Case as You Respond to the Question

question 65

Multiple Choice

Consider the following short case as you respond to the question: Abruzzi's Italian Kitchen is a small family restaurant with an administrative staff of four people.Giuseppi Abruzzi is the chief executive officer; his wife Maria is the chief financial officer.Their son Antonio is responsible for all transactions dealing with kitchen supplies, including the raw materials for menu items; their son Carlo is responsible for all transactions dealing with dining room supplies, such as eating utensils.The restaurant's administrative practices have developed over the ten years of its existence with minimal reliance on information technology and formal procedures and a stronger emphasis on interpersonal relationships with a few reliable vendors.Once a month, Antonio places orders for kitchen supplies with one of four vendors based on price; the supplies are usually received within ten calendar days.On receipt of the supplies, Antonio pays the vendor with a company check.Carlo follows a similar process for dining room supplies, but works with a set of three vendors, none of which sell kitchen supplies.Internal control would be strengthened at Abruzzi's Italian Kitchen if:

• A)Kitchen supplies were ordered more than once a month.
• B)Non-family members were hired in key positions.
• C)Both kitchen supplies were ordered more than once a month and non-family members were hired in key positions.
• D)Neither kitchen supplies were ordered more than once a month nor non-family members were hired in key positions.

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Definitions:

Direct Bankruptcy Costs

These are the costs associated directly with the bankruptcy process, including legal fees, accounting fees, and other administrative expenses for processing a bankruptcy filing.

Legal and Administrative Expenses

Costs associated with the legal operation of a business and general administrative tasks, including legal fees, licensing, and managerial salaries.

Bankruptcy

is a legal process through which individuals or businesses unable to meet their financial obligations can seek relief from some or all of their debts.

Weighted Average Cost of Capital

A calculation of a firm's cost of capital, wherein each category of capital is proportionally weighted.