Rita Flynn, CPA, has her own accounting firm in Golden, Colorado. Rita caters primarily to small businesses and, over the last 15 years, has built a loyal list of clients. Rita offers her clients a full range of audit, tax, and business advisory services, typically charging her clients $100 per hour plus out-of-pocket expenses. (The client pays for any direct costs related to Rita's travel, filing tax returns, and so on.) Moreover, almost all of Rita's costs are fixed and relate to her office operating expenses such as rent, support staff, and her own compensation.
It is now mid-August, a traditionally slow period; the busy tax and audit season is nearly five months away. Rita normally uses this time for rest, relaxation, and recreation. Indeed, Rita is an avid mountain and rock climber, which partly motivated her move to Colorado. On August 15, a long-time but relatively small-volume customer approached Rita with an interesting project. However, the client's business is in the doldrums, and the client wants Rita to give them a 50% "loyalty" discount. Rita is trying to decide whether she should accept the project.
Required:
What are the quantitative and qualitative factors Rita 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.