Consider the Following Short Case as You Respond to the Question

question 61

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.Abruzzi's Italian Kitchen is exposed to:

• A)Systems risk and human error risk.
• B)Human error risk and liquidity risk.
• C)Liquidity risk and systems risk.
• D)Human error risk, systems risk and liquidity risk.

---

Definitions:

Transaction

An exchange or transfer of goods, services, or funds between parties.

Substitutes

Products or services that can replace each other in use, satisfying the same customer need or demand.

Oligopoly

Defines a market structure characterized by a small number of firms dominating the market, leading to limited competition.

Brand Loyalty

Occurs when a consumer buys the same brand’s product or service repeatedly over time rather than buying from multiple suppliers within the same category.