AS Business Studies

Break-Even 1 CustomersTFCTVCTCTR

Break-Even 2 CustomersTFCTVCTCTR

Weeks

Benefits of Break-even Analysis to Cotswold Water Hotel 1. Shows the owners clearly how much profit or loss they will make e.g. In the summer months the business makes a profit of £6000 but for the rest of the year a loss of £ Break-even is not complex to calculate and provides the owner with a useful guide to the performance of their hotel 3. Break-even has been used by the owners to show the impact of changing their prices from £40 to £55. They now no longer make a loss in the non-summer months

Limitations of Break-even Analysis to Cotswold Water Hotel 1. There is an assumption that all rooms will be occupied throughout the year 2. There is an assumption that all costs and revenues are linear but in reality this may not be true. For example, if the hotel increases its capacity then through managerial economies costs per unit may fall through using specialist employees such as an experienced hotel manager

Limitations of Break-even Analysis to Cotswold Water Hotel 1. Break-even assumes that increasing the price of rooms will help the business but in reality it may deter customers from booking a room there 2. Costs and prices are likely to change in reality so the validity of the analysis is very short-term