Target Net Profit Formula

Finance Formula • Published on July 30, 2026 • Last updated July 30, 2026

Mathematical Equation

$$\text{Target Sales Units} = \frac{\text{Total Fixed Costs} + \text{Desired Target Net Profit}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}$$

Variable Definitions

Fixed Costs

Overhead costs independent of production volume

Desired Profit

Target net income goal beyond breaking even

Unit Contribution Margin

Selling Price per Unit minus Variable Cost per Unit

Detailed Explanation

In-Depth Guide

The target net profit formula calculates the total unit sales volume and gross revenue required to achieve a specific profit goal beyond breaking even.

How to Calculate: Step-by-Step

1. Calculate Contribution Margin per Unit = Price - Variable Cost. 2. Add Desired Target Net Profit to Total Fixed Costs. 3. Divide (Fixed Costs + Target Profit) by Unit Contribution Margin. 4. Output is required sales units to reach profit goal.

Worked Calculation Example

Fixed Costs = $100,000, Price = $500, Variable Cost = $300 (CM = $200), Target Profit = $50,000: - Total Target Overhead = $150,000. - Target Units = $150,000 / $200 = 750 units ($375,000 revenue).

Common Use Cases

  • Annual profit planning
  • Investor return targeting
  • Sales goal setting

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