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Transcription of this question: Fang Kwong and XIAN TechnologyFang Kwong lives in a village in the mountains of western China. A major problem for the residentsof that region is that they must transport large amounts of firewood for their kitchen ovens. Fang wastold Of a solution by XIAN Technology, which created a new type of kitchen oven that burns straw andOther farm waste products instead Of firewood.Both XIAN Technology and the Chinese government wish to help small entrepreneurs* set upfranchises to provide distribution channels for these new kitchen ovens. Fang is very keen totake advantage Of this opportunity. She has identified a small local warehouse with sufficientstorage space. In order to receive a USSIOOOO small-business loan from the government at the startOf September 2012, she must complete a cash-flow forecast. She has estimated the following figuresfor the first six months Of operation, to begin in September 2012:(Assume one month is 30 days)SalesMonthl rentMonthl salMonthly supplies (e.g. stationery)Monthly interest on government loan to setup businessOverhead costsFang’s purchases from XIAN Technology20 kitchen ovens per month at USS50 for the firstthree months. From the fourth month Fang forecastsan increase in sales Of two kitchen ovens each month.USS400USS200USS50USS42IJSS200, payable every Other month, starting inOctober 2012.• First month purchase Of 60 kitchen ovens atIJSS25 each and payable at the end Of the secondmonth.• From the second month purchase Of 20 kitchenovens per month, at USS25 each and payable atthe end Of the following month.Fang will need to purchase a lorry to deliver the XIAN Technology kitchen ovens to customers wholive in remote villages. She will charge a delivery fee, but it will be insufficient to cover the cost Ofthe purchase. Fang will need an additional source of finance for the lorry.As a franchisee, she will be the only distributor Of these new kitchen ovens in a 500 square kilometrearea. However, Fang must submit financial accounts to XIAN Technology’ every three months.Despite the agreement, Fang fears that Other distributors will soon start supplying similar products,resulting in increased competition and lower gross profit margins(b)(c)(d)(i) Identify two appropriate sources Of finance for Fang to purchase a lorry.(ii) Define the term overhead costs.Prepare a monthly cash-flow forecast for the first six months Of operation OfFang’s business.Explain XIAN Technology S requirement that Fang present them with financialaccounts every three months.Analyse the impact on Fang’s business ifnew competition leads to a decrease inher gross profit margin.[2 marks][2 marks][6 marks][5 marks][5 marks]

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