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Transcription of this question: 5.Tommy the BakerTommy the Baker has developed a range Of specialty breads. His turnover is growing fast andcustomers are coming from further away to purchase his products. In order to sustain long-termgrowth Tommy wants to expand the business by franchising. He has already received enquiries froma number Of potential franchisees and needs to show them clear financial figures.The bakery makes and sells 400 kg Of bread per day. The raw materials for the bread are flour,yeast and spices. The bakery works every day Of the month (assume 30 days) and employs 4 workerswho earn an average Of Sl 000 each. Tommy does not pay himself a salary. Each kg of bread sellsfor S3_ His initial investment to buy the three machines he uses, the oven and the counters and Otherfittings was $80 000.Fixed costs per month:Rent, gas bill, electricity, cleaning and maintenance of machines and shop: S8000Salaries: S4000Variable costs per kg Of bread:Flour/kg = so.50= $0.20Yeast/kgSpices/kg = $0.25(a)(b)(c)Describe one advantage and one disadvantage Of growth by franchise toTommy the Baker.Assuming that the bakery is currently producing 12000 kg of bread per month:(i) calculate the monthly break-even level Of output, the level of profit and themargin Of safety. (Show all your working)(ii) prepare a break-even chart showing clearly the monthly break-even levelOf output, the level of profit and the margin Of safety calculated inDiscuss the limitations Of a potential franchisee using break-even analysis asthe only source Of information when considering whether to adopt a Tommy theBaker franchise.[4 marks][4 marks][4 marks][8 marks]

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