Question 1

The internal control structure of a private hospital in Suva is summarized below:

1. Receipts are issued for all money received, although the are not prenumbered or filed in any way. Banking is done daily, with all cheques and cash listed by the person who opens the mail and enters the receipts into the computer system.
2. All payments are made by cheque from a general account which can be accessed by any of the three directors.
3. At the end of the month, a bank reconciliation statement is prepared and balanced by one of the directors. The director who performs the reconciliation instructs the accountant as to the adjustments to journalize.

Required:

• Who is responsible for the internal control in the private hospital?

(1 mark)

• Comment on any control (i) strengths and (ii)weaknesses in the private hospital's internal controls.

(6 marks)

• Identify three objectives associated with a system of internal controls.
• (3 marks)

• Identify the five components of internal controls.

(5 marks)

• Identify three high level controls and give an example of a procedure designed to ensure each of these operates effectively.

(5 marks)

Question 2

Explain how financial information flows through an accounting information system in your organization.

(8 marks)

Question 3

The general manager of a chain of pharmacies recently said 'we need to have an external auditor for our financial statements so that we can guarantee their accuracy to our bank'. Will that be the result if an auditor is appointed?

(2 marks)

Question 4

Suppose a manufacturing firm is equipped to produce pacemakers and stents. The table below shows provides six possible production possibilities that the manufacturing firm can produce from its available resources and technology during the year.

	Pacemakers	Stents
A	100	0
B	90	10
C	70	25
D	40	36
E	10	42
F	0	45

Required:

1. Draw the production possibilities curve (PPC) for the manufacturing plant (put pacemakers on the x axis).

(1 mark)

1. What does a PPC show? What are the assumptions about resources and technology in the PPC model? (1 mark)

1. Suppose the manufacturing plant is currently producing as combination C. If the manufacturing plant chooses to produce at combination B, what is the opportunity cost of moving from combination C to B?

(1 mark)

1. Suppose the manufacturing plant is currently producing at combination C. If the manufacturing plant chooses to produce at combination D, what is the opportunity cost of moving from combination C to D?

(1 mark)

1. What is the opportunity cost of producing one extra pacemaker?

(1 mark)

1. What is the opportunity cost of producing one extra stent?

(1 mark)

1. What good should the manufacturing plant specialize in producing and why?

(1 mark)

1. Is the manufacturing plant PPC linear? Explain.

(1 marks)

Question 5

The graph below shows the supply and demand curves for a certain product. Answer the questions that follow:

1. Why does a demand curve slope downwards from left to right while a supply curve slopes upward from left to right? (2 marks)

1. Draw or illustrate a new demand curve on the current graph to show the behavior of the demand if there is an increase in income. (1 mark)

1. Calculate the price elasticity of demand if price increases from $6 to $8 dollars (3 marks)

1. Interpret your answer in part 'c' (2 marks)

1. Calculate the price elasticity of supply if price increases from $2 to $6 dollars (3 marks)

1. Interpret your answer in part 'e' (2marks)

1. What is the equilibrium price and quantity in the graph? (2 marks)

1. Interpret what your answer in 'f' means in terms of this product. (2 marks)