How do I calculate the break-even point?

Break-even volume is fixed costs divided by the contribution per unit, where contribution is selling price minus variable cost. AED 50,000 of fixed costs at AED 40 contribution per unit gives a break-even of 1,250 units.

What if my price is below my variable cost?

Then there is no break-even point. Contribution is negative, so every additional unit sold increases the loss. The answer is a price or cost change, not more volume.

Break-Even Calculator for Businesses

Summary Response

"Break-even volume is fixed costs divided by the contribution per unit, where contribution is selling price minus variable cost. With AED 50,000 of fixed costs, a price of AED 100 and AED 60 of variable cost, contribution is AED 40 and break-even is 1,250 units, or AED 125,000 of revenue."

Applying This in the UAE

Include annual licence renewal, visa costs and office rent in fixed costs, in the UAE these are substantial and easy to omit.

If you are VAT-registered, model prices excluding VAT: the 5% you collect is not revenue, it is money held for the Federal Tax Authority.

Rent is usually paid in one to four cheques annually rather than monthly, so a monthly break-even can look comfortable while cash flow is not.

Frequently Asked Questions

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