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Transcription of this question: 2.Barbara Johnson manages a small business (GF) that produces and sells gluten-free* bread.GF has been recognized for meeting national quality standards for gluten-free bread which has helpedincrease sales. Local supermarkets sell their own label brands Of gluten-free bread which do not meetnational quality standards at a price 20% cheaper than GF. Barbara aims to make national qualitystandard gluten-free bread more affordable and in larger batches.GF has 21 employees. Four are gluten-sensitive (intolerant) testers who check the quality Of thefinal bread. This traditional method Of quality control is important, but takes significant timeand resources.Several hospitals have asked if GF can provide them with an additional 1200 loaves Of gluten-freebread every day for the next year Barbara is keen, however in a small market like this, becominglarger does not automatically result in economies Of scale. GF’s suppliers cannot provide largerquantities Of gluten-free flour without increasing their prices and consequently GFS costs.Barbara has two options:Option 1: Increase GFS production Of gluten-free bread and maintain national qualitystandards by introducing total quality management (TQM) control at a one-off cost OfThis should also speed up the batch production process.Option 2: Buy-in the additional 1200 loaves from the company that supplies thelocal supermarkets and then sell this bread to the hospitals. However this supplier uses flowproduction and does not meet national quality standards.Barbara has two options:Option 1: Increase GFS production Of gluten-free bread and maintain national qualitystandards by introducing total quality management (TQM) control at a one-off cost OfThis should also speed up the batch production process.Option 2: Buy-in the additional 1200 loaves from the company that supplies thelocal supermarkets and then sell this bread to the hospitals. However this supplier uses flowproduction and does not meet national quality standards.The sales price per loaf Of GF bread is S6_80 regardless Of the option chosen.Barbara prepared the following figures for each option (in S):Option I Increase GFS production to make the additional 1200 loaves.Fixed costs:one-off cost from introducin TQMSemi-variable costs:additional electrici costsVariable costs:additional gluten-free flourovertime a for staff40002000+ an additional 0.20 er loafbaked0.80 per loaf0.40 er loafOption 2: Buy-in the additional 1200 loaves.Total variable cost of buying in 1200 7200loaves from local su rmarkets’ SLl lier(Question 2 continued)(a)(b)(c)(d)(e)Identify two features Of an own label brand.Define the term economies of scale.Explain two benefits and one cost to GF Of meeting national quality standardsfor its bread.(i)(ii)(iii)Calculate the variable cost per loaf to GF if they buy-in the additional1200 loaves from the local supermarkets’ supplier.Using relevant information given, calculate whether GF should eitherbuy-in the additional 1200 loaves from the local supermarkets’ supplier,or make the loaves themselves (show all your working and State anyassumptions you make).Comment on whether GF should make or buy-in the additional1200 loaves.Analyse two reasons why GF should move from traditional quality controlmethods to a TQM approach.[2 marks][2 marks][6 marks][l mark][5 marks][3 marks][6 marks]

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