Aqid ERPMeaning
The break-even point (نقطة التعادل) is where total revenue equals total cost. To find it, split costs into fixed (rent, salaries, depreciation, which do not move with volume) and variable (materials, freight, commission, which do). The contribution margin is price less variable cost per unit, or as a ratio, revenue less variable costs over revenue. Break-even in units is fixed costs divided by contribution per unit; in riyals, fixed costs divided by the contribution ratio.
The sum answers the questions a business asks most: how many units must be sold to pay the rent, what a price cut does to the volume needed, whether a new hire's salary is covered. It assumes costs behave linearly and the mix of products stays the same, which is fine for a plan and wrong for a forecast past the next few months.
Also called: break-even analysis · contribution margin · نقطة التعادل
Example
A café's fixed costs are 45,000.00 a month. A coffee sells for 18.00 before VAT and costs 6.00 in beans, milk and cups, a contribution of 12.00. Break-even is 45,000 divided by 12, or 3,750 cups a month, 125 a day. At 150 a day it earns 300.00 a day above break-even.