Edmund Heil, Jr., CPA, has his own accounting firm in Golden, Colorado. Edmund caters primarily to small
Question:
Edmund Heil, Jr., CPA, has his own accounting firm in Golden, Colorado. Edmund caters primarily to small businesses and, over the last 15 years, has built a loyal list of clients. Edmund offers his clients a full range of audit, tax, and business advisory services, typically charging his clients $100 per hour plus out-of-pocket expenses. (The client pays for any direct costs related to Edmund's travel, filing tax returns, and so on.) Moreover, almost all of Edmund's costs are fixed and relate to his office operating expenses such as rent, support staff, and his own compensation.
It is now mid-August, a traditionally slow period; the busy tax and audit season is nearly five months away. Edmund normally uses this time for rest, relaxation, and recreation.
Indeed, Edmund is an avid mountain and rock climber, which partly motivated his move to Colorado.
On August 15, a long-time but relatively small-volume customer approached Edmund with an interesting project. However, the client's business is in the doldrums, and the client wants Edmund to give them a 50% "loyalty" discount. Edmund is trying to decide whether he should accept the project.
Required:
What are the quantitative and qualitative factors Edmund should consider in deciding whether to accept the long-time client's project? Assume that the job would take 20 hours and that the client would cancel the job before paying full price.
Step by Step Answer:
Managerial accounting
ISBN: 978-0471467854
1st edition
Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin