QUESTION TWO [25] RFT, an engineering company, has been asked to provide a quotation for a contract to build a new engine. The potential customer is not a current customer of RFT, but the directors of RFT are keen to try and win the contract as they believe that this may lead to more contracts in the future. As a result they intend pricing the contract using relevant costs. The following information has been obtained from a two-hour meeting that the Production Director of RFT had with the potential customer. The Production Director is paid an annual salary equivalent to R1 200 per 8-hour day. 110 square metres of material A will be required. This is a material that is regularly used by RFT and there are 200 square metres currently in inventory. These were bought at a cost of R12 per square metre. They have a resale value of R10.50 per square metre and their current replacement cost is R12.50 per square metre.