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Target Profit Volume Calculator

The volume needed to hit a profit target rather than merely to break even, with the target stated either as an amount or as a margin on revenue. A margin target is the harder of the two, because the revenue it is a percentage of moves with the volume.

Also called: required sales volume calculator, profit target calculator.

₹
₹
₹
₹
How the target is stated
%
%
Units required
1,200

1,200 units to reach the target, against 800 to break even. The first 800 units pay for the fixed costs and contribute nothing to profit. Every unit after that adds its full 500 of margin, which is why the last stretch to a target is easier than the first. Enter a tax rate if the profit target is stated after tax, in which case it has to be grossed up first.

Break-even volume
800
Revenue required
₹14,40,000
Pre-tax profit needed
₹2,00,000
Contribution a unit
₹500
Units above break-even
400
Profit from each unit above break-even
₹500
On the target
The first 800 units pay for the fixed costs and contribute nothing to profit. Every unit after that adds its full 500 of margin, which is why the last stretch to a target is easier than the first.
On tax
Enter a tax rate if the profit target is stated after tax, in which case it has to be grossed up first.
How this is calculated

The path to the target

UnitsRevenueProfitShare of the way
0₹0-₹4,00,0000%
200₹2,40,000-₹3,00,00017%
400₹4,80,000-₹2,00,00033%
600₹7,20,000-₹1,00,00050%
800₹9,60,000₹067%
1,000₹12,00,000₹1,00,00083%
1,200₹14,40,000₹2,00,000100%
Method and background

How this is calculated

Above break-even every unit contributes its whole margin to profit, so a profit target simply adds to the fixed costs in the numerator. A margin target behaves differently: the profit required rises with revenue, so the equation has volume on both sides and rearranges to divide by the contribution ratio less the target margin. That denominator can go to zero or negative, which is the case where the target margin exceeds the contribution ratio and is therefore unreachable at any volume. The page says so rather than returning a large number. Where the target is stated after tax it is grossed up first, since the tax falls on the profit and not on the volume.

the target profit simply joins the fixed costs in the numerator, because above break-even every unit contributes its full margin to profit
π
Target profit

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a 200,000 profit target

Fixed costs a month
₹4,00,000
Price a unit
₹1,200
Variable cost a unit
₹700
Profit target
₹2,00,000
How the target is stated
An amount of profit
Target margin on revenue
15%
Tax rate, if the target is after tax
0%

Units required1,200

(400000 + 200000) / 500

Open this example

the same target stated after tax

Fixed costs a month
₹4,00,000
Price a unit
₹1,200
Variable cost a unit
₹700
Profit target
₹2,00,000
How the target is stated
An amount of profit
Target margin on revenue
15%
Tax rate, if the target is after tax
25%

Units required1,333

boundary: an after-tax target needs grossing up first

Open this example

Method and limits

What it assumes

  • Linear costs across the volume range required.

What it deliberately does not model

  • A target requiring volume far above current sales is a plan, not a calculation.
  • Fixed costs usually step up before volume doubles, which this straight-line model does not capture.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Why can a margin target be impossible?
Because a margin on revenue rises as revenue rises. If the target margin is above the contribution margin ratio, no volume reaches it: every extra unit adds more to the required profit than it adds in contribution.