A farmer sells wheat to a bakery for R50 000. The bakery uses it to bake bread and sells the bread to households for R120 000. Using the production (value-added) approach, GDP increases by:

The farmer sells wheat for R50 000. Since there are no intermediate goods mentioned for the farmer, this is the full value added.

$$\text{Value added by farmer} = \text{R}50\,000$$

The bakery buys wheat for R50 000 and sells bread for R120 000. The value added by the bakery is the difference between its sales revenue and the cost of intermediate goods (wheat).

$$\text{Value added by bakery} = \text{Sales revenue} - \text{Cost of intermediate goods}$$ $$\text{Value added by bakery} = \text{R}120\,000 - \text{R}50\,000 = \text{R}70\,000$$

The total increase in GDP is the sum of the value added at each stage of production.

$$\text{Total GDP increase} = \text{Value added by farmer} + \text{Value added by bakery}$$ $$\text{Total GDP increase} = \text{R}50\,000 + \text{R}70\,000 = \text{R}120\,000$$

The correct option is C.

The final answer is $\boxed{\text{R120 000}}$.