Session 10 Homework QuestionsThe following two questions are based on the following case.McPeters Case DescriptionMcPeters is a regional chain of fast food restaurants operating on the West Coast of the United States. McPeters is publicly owned and its stock is traded on the American Stock Exchange. A Board of Directors, who has appointed a Chief Executive Officer to handle the day-to-day management of the chain, runs McPeters. McPeters offers New Mexican cuisine in a fast food style. Their menu includes tacos, burritos, tostados, enchiladas, fajitas, and salads with a variety of fillings, most of which include green chilies. All restaurants are company owned and operated. Each has a manager who is responsible for the daily operations of the restaurant including hiring and scheduling staff, purchasing food and supplies, and running local promotions. McPeters restaurant #33, located in Lodi California, recently opened and its new manager, Uwe Gonzales, is concerned about competing with established Mexican restaurants and fast food outlets in the area. Lodi is an agricultural community in the middle of the great Central Valley of California and many of its residents are Hispanic. Uwe feels that his customers will be very sensitive to the quality of the ingredients he uses and wants to monitor his food vendors closely. He has established the following purchasing procedures to control interactions with food vendors.Each night, the assistant manager responsible for closing the restaurant takes an inventory of food and supplies on hand and writes up an order to replenish the inventory for these items. (S)he consolidates all items that are ordered from an individual vendor into one order so that there are only one order per vendor. Uwe, who opens up in the morning, reviews the orders and contacts the restaurant’s primary vendors to place the orders. He double checks the vendors’ files to make sure that there have been no problems with the vendors’ delivery speed or product quality before placing the orders. Uwe has established electronic ordering arrangements with all his vendors and so all he has to do is either e-mail the order to the vendor or use the vendor’s website, if the vendor maintains one. A copy of all orders is stored in the restaurant’s database when they are placed. When shipments arrive, Uwe or the assistant manager on duty receives the shipment by checking in the food and supplies and comparing the items shipped to the order information stored in the restaurant’s database system. For control purposes, Uwe insists that only one person, either himself or one of the assistant managers, check in merchandise. The person who checks in the shipment updates the restaurant’s database by recording the amount and date of the items received and checking off items from an outstanding order list. Uwe does not allow shipments to be received if they were not ordered. They are not even removed from the vendor’s or shipper’s truck. Any problems with a vendor’s shipments (e.g., late shipments or incomplete shipments, defective items) are logged in the database. Since the restaurant cannot control how the vendors structure their shipments, shipments can be incomplete because the vendor does not have sufficient quantities on hand to fill the order. In addition, more than one order can be combined into one shipment. Because of the perishable nature of food products, Uwe does not allow backorders. If a vendor ships an incomplete order, the missing items are reordered. To maintain consistent receiving policies, he has extended the “no backorder” policy to supplies as well.When invoices arrive from the vendors, the restaurant’s bookkeeper compares the information on the invoice to the order and receiving information in the restaurant’s database and writes a check for payment but does not sign it. Since Uwe cannot control vendors’ billing practices, invoices may cover parts of shipments or more than one shipment. To make the payment, Uwe must sign all checks and he usually double checks, on a sample basis, the bookkeepers’ work before signing and mailing the checks.Questions1)