Accounting Q&A

How do I calculate target profit?
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Target profit is a decision, rather than a calculation. It is a goal for how much money a company wants to make.

You can start by calculating the break even point, and then decide how much profit you want to make in addition to breaking even. Here's the Break-Even formula:

Breakeven Point = Fixed Costs / Contribution Margin per Unit
Contribution Margin = Unit Selling Price - Variable Costs

If you want to make $50,000 profit, then $50,000 is your Target Profit. You can add that to the formula like so:
Sales Goal = Fixed Costs + Target Profit / Contribution Margin per Unit


F.c + Target profit

Unit =

2) Target Profit

Unit C.M

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