# Palakiko’s Fish Taco Hut is a small start-up restaurant in Hanalei. Palakiko recently completed an online risk management course and has identified food safety as his restaurant's top risk Specifically, he is concerned that the potential of spoiled food resulting from inadequate refrigeration and food preparation techniques could drastically increase restaurant costs. The chart below contains a description of this top risk, an inherent risk assessment, three risk response alternatives, and a residual risk assessment for each response alternative. Finally, Palakiko estimates that the cost of implementing risk response A is $201,250, and the cost of implementing risk response B is$195,000. Required: 1. Calculate the inherent risk for Palakiko. 2. Calculate the residual risk for Palakiko associated with each of the three risk response alternatives A, B, and C. 3. Calculate the benefit for Palakiko associated with each of the three risk response alternatives A, B, and C. 4. Calculate the net benefit for Palakiko associated with each of the three risk response alternatives A. B, and C. 5. Using net benefit as the criterion, which risk response should Palakiko choose to implement?

### Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

### Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

#### Solutions

Chapter 13, Problem 27BEB
Textbook Problem

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