（b) Briefly explain the two types of informal communication known as the grapevine and rum

(b) Briefly explain THREE limitations of negotiated transfer prices. (3 marks)

(c) Explain the term ‘target costing’ and how it may be applied by GWCC. Briefly discuss any potential

limitations in its application. (8 marks)

(ii) Briefly explain the extent to which the application of sensitivity analysis might be useful in deciding

which refrigeration system to purchase and discuss the limitations inherent in its use. (3 marks)

(c) Excluding the number of complaints by patients, identify and briefly explain THREE quantitative

non-financial performance measures that could be used to assess the ‘quality of service’ provided by the

Dental Health Partnership. (3 marks)

Directions:

In your essay, you should

1) describe the drawing briefly,

2) explain its intended meaning, and then

3) give your comments.

You should write neatly on ANSHWER SHEET 2. (20 points)

(ii) Briefly explain the implications of Parr & Co’s audit opinion for your audit opinion on the consolidated

financial statements of Cleeves Co for the year ended 30 September 2006. (3 marks)

Part B

Directions:

In your essay, you should

1) describe the drawing briefly,

2) explain its intended meaning, and then

3) give your comments.

You should write neatly on ANSHWER SHEET 2. (20 points)

Required:

(a) Briefly explain the main purposes of the three main formal communication channels in an organisation:

(i) Downwards; (3 marks)

(b) Ratio analysis in general can be useful in comparing the performance of two companies, but it has its limitations.

Required:

State and briefly explain three factors which can cause accounting ratios to be misleading when used for

such comparison. (6 marks)