Quick Answer: How Do You Calculate Target Profit?

Target profit

  • Multiply the expected number of units to be sold by their expected contribution margin to arrive at the total contribution margin for the period.
  • Subtract the total amount of expected fixed cost for the period.
  • The result is the target profit.

What is target profit and how is it calculated?

Target profit simply can be calculated by the following formula: Let’s say you want to reach the target profit of $1000, but you don’t know what sales should be. So, your target profit = volume needed = TFC target prof/ SPU-VCU where; SPU=Selling price per unit and VCU= Variable cost per unit.

How do you calculate desired profit?

To calculate the desired profit volume simply the desired profit is added to the fixed cost and divided by the unit contribution.

How do you find the breakeven point in target profit?

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What is the formula to calculate the amount of sales required to earn a specific profit?

To calculate the required sales level, the targeted income is added to fixed costs, and the total is divided by the contribution margin ratio to determine required sales dollars, or the total is divided by contribution margin per unit to determine the required sales level in units.

What is a profit target?

A profit target is a predetermined point at which an investor will exit a trade in a profitable position. Profit targets are part of many trading strategies that investors and technical traders use to manage risk.

How do I find target sales units?

Target income sales in units can be calculated by dividing the sum of total fixed costs and target operating income by the contribution margin per unit:

  1. Target Income Sales in Units Fixed Costs Target Operating Income Contribution Margin per Unit.
  2. Contribution Margin per Unit Sales Variable Costs Total Units Sold.