CVP Target Profit Calculator
Calculate continuous sales volume and revenue for a pretax operating profit target under stated price and cost assumptions.
How the calculation works
Enter fixed costs, variable cost per unit, selling price per unit, and a target operating profit for the same product and period. Unit contribution margin is price less variable cost per unit.
For a positive unit contribution margin, required units equal fixed costs plus the target profit, divided by unit contribution margin. Required revenue is those units multiplied by price. Break even units equal fixed costs divided by unit contribution margin.
The model keeps continuous quantity results and does not round up to whole items. If the unit contribution margin is zero or negative, a positive target cannot be reached by selling more units. The calculator distinguishes that case from a zero target already reached at zero units.
This is a single product, pretax operating profit model. It assumes constant price and variable cost per unit across the modeled volume. Cost and target assumptions may be saved in local browser storage when available. Selling price is not saved.
Step by step
- Enter fixed costs, variable cost per unit, selling price per unit, and target profit.
- Review unit contribution margin, contribution margin ratio, target volume, and break even results.
- Change one assumption at a time to compare continuous volume scenarios.
Worked example
For one period, let fixed costs be $1,000, variable cost per unit be $15, selling price per unit be $25, and target operating profit be $500. Unit contribution margin is $10 and its ratio to price is 40%. Break even volume is 100 units and $2,500 of revenue. The target requires 150 units and $3,750 of revenue.
These are continuous quantities and exact model outputs before display rounding. They assume the same $25 price and $15 variable cost for each unit, with fixed costs held at $1,000. The unit test checks the results.
When to use this calculator
Use this calculator to solve a single product cost volume profit equation for continuous volume and revenue at a stated pretax operating profit target. It also shows break even volume when that result exists.
It can help check a classroom problem or a scenario with explicit assumptions. For operating plans, model price changes, demand, product mix, and production limits separately.
Common interpretation errors
Do not mix currencies, products, or periods. The selling price, variable cost, fixed costs, and target profit must describe the same product and period. All displayed amounts use USD and no conversion is performed.
Do not treat fractional units as a whole item sales plan. This model preserves continuous quantities. If whole items are required, round up separately and check the profit at that quantity.
Formula and units
Unit contribution margin = Price per unit − Variable cost per unit
Contribution margin ratio (%) = Unit contribution margin ÷ Price per unit × 100
Target units = (Fixed costs + Target operating profit) ÷ Unit contribution margin
Target revenue = Target units × Price per unit
Break even units = Fixed costs ÷ Unit contribution margin
The target is pretax operating profit, not net income or cash flow. Amounts use USD and must refer to the same currency and period. Quantity is continuous, so fractional units are retained. When the target is zero and fixed costs are zero, the target is already reached at zero units. If unit contribution margin is zero and fixed costs are also zero, every quantity has zero operating profit, so there is no unique break even quantity.
Limitations and assumptions
The model assumes one product, a constant selling price and variable cost per unit, and fixed costs that remain unchanged across the modeled volume. It excludes taxes, interest, product mix, discounts, capacity limits, demand, and cost changes. Results are conditional arithmetic, not a sales forecast or business recommendation.
Key terms
- Unit contribution margin
- Selling price per unit less variable cost per unit.
- Contribution margin ratio
- Unit contribution margin divided by selling price per unit and displayed as a percentage.
- Target operating profit
- Pretax operating profit amount entered as the goal, before interest and income taxes.
Compare related calculations
A break even calculator focuses on the zero operating profit point. A target profit calculation adds the desired operating profit to fixed costs before dividing by unit contribution margin. The degree of operating leverage calculator answers a different question about EBIT sensitivity near a modeled operating point.
This calculator uses contribution margin based on variable cost per unit. Gross profit can deduct cost of goods sold that includes allocated production overhead, so gross margin and contribution margin should not be treated as interchangeable measures.
FAQ
What is unit contribution margin?
It is selling price per unit less variable cost per unit. The amount remaining from each unit contributes toward fixed costs and then operating profit. It is not the same as gross profit unless the entered variable cost represents all costs deducted in that gross profit measure.
How many units are needed for a target profit?
When unit contribution margin is positive, add fixed costs and target operating profit, then divide by unit contribution margin. The result is continuous quantity. For example, 214.2857 units means the model needs that quantity under its assumptions; it does not mean that selling 214 whole items reaches the target.
When is the target profit unreachable?
If price per unit is no greater than variable cost per unit, each additional unit contributes zero or a negative amount. A positive operating profit target is then unreachable under the entered assumptions. A target of zero with zero fixed costs is already reached at zero units.
How does the break even result differ from target profit?
Break even units solve for operating profit of zero, while target units solve for the entered operating profit. With the same inputs and a target of zero, their quantities match when a unique result exists. If unit contribution margin and fixed costs are both zero, every quantity is at break even and there is no unique quantity.
Does this calculator round up to whole units?
No. It retains the continuous quantity produced by the formula. A business selling indivisible items may need to round the required quantity up and recalculate the resulting profit separately.
Related tools
Use the break even calculator for the zero profit point and the Operating Leverage DOL Calculator for EBIT sensitivity. Compare gross profit assumptions with a gross margin calculator when cost of goods sold is the measure you need.