Quantity for a target profit
The break-even formula extends easily: the target profit is added to fixed costs, and both must be earned through contribution.
Worked example
Price £43.50, variable cost £19.00 per unit, fixed costs £52,675.00. How many units must be sold for a profit of £24,500.00?
Worked solution
- 1.Quantity = (fixed costs + profit) / unit contribution = (£52,675.00 + £24,500.00) / £24.50
- 2.= £77,175.00 / £24.50 = 3,150
Typical mistake: Dividing the profit by the price; each extra unit only brings its contribution.
Your turn
Three problems of exactly this type, each time with new numbers. Amounts with or without thousands separators.
Task
Price £94.00, variable cost £63.00 per unit, fixed costs £58,900.00. How many units must be sold for a profit of £7,750.00?
Quantity in units
Amounts like 12,500 or 12500.50; percentages as a number (12.5). Round to the penny or 2 decimal places.
Formulas for this topic
- Break-even quantity = fixed costs / unit contribution
- Break-even revenue = quantity × price
- Quantity for a target profit = (fixed costs + profit) / unit contribution
- Margin of safety = planned sales − break-even quantity
Typical mistake: Dividing the profit by the price; each extra unit only brings its contribution.
Frequently asked questions
What is the typical mistake in "Quantity for a target profit"?
Dividing the profit by the price; each extra unit only brings its contribution.
Why divide by contribution and not by price?
Each unit first covers its own variable cost; only the rest, the contribution, is left for fixed costs.