Accountants Profit Target Calculator Examples
See worked examples of how fixed costs, variable costs, and profit goals affect the revenue a business needs.
These examples show how to turn different operating profit targets into estimated sales requirements. Each uses the same reporting period for revenue, fixed costs, and the profit target.
Annual profit target with a 60% contribution margin
Established service business planning its annual sales target.
Input Summary
Target operating profit
$100,000
Fixed costs
$150,000
Variable costs as a percentage of sales
40%
Forecast revenue
$300,000
Calculation Breakdown
- 1Contribution margin100% - 40%60%
- 2Required contribution$150,000 + $100,000$250,000
- 3Revenue needed$250,000 / 0.60$416,666.67
- 4Revenue shortfall$416,666.67 - $300,000$116,666.67
Result Summary
Revenue shortfall
$116,666.67
Accountants Profit Target Calculator
Estimated revenue needed is $416,667, with an additional revenue requirement of about $116,667.
Online retailer with higher variable costs
E-commerce business targeting a $50,000 operating profit for the year.
Input Summary
Target operating profit
$50,000
Fixed costs
$80,000
Variable costs as a percentage of sales
55%
Forecast revenue
$240,000
Calculation Breakdown
- 1Contribution margin100% - 55%45%
- 2Required contribution$80,000 + $50,000$130,000
- 3Revenue needed$130,000 / 0.45$288,888.89
- 4Forecast operating profit$240,000 × 0.45 - $80,000$28,000
- 5Revenue shortfall$288,888.89 - $240,000$48,888.89
Result Summary
Revenue shortfall
$48,888.89
Accountants Profit Target Calculator
The retailer needs about $288,889 in revenue and is approximately $48,889 below that target.
Consultancy with low variable costs
Professional services firm setting a $120,000 annual operating profit target.
Input Summary
Target operating profit
$120,000
Fixed costs
$180,000
Variable costs as a percentage of sales
25%
Forecast revenue
$350,000
Calculation Breakdown
- 1Contribution margin100% - 25%75%
- 2Required contribution$180,000 + $120,000$300,000
- 3Revenue needed$300,000 / 0.75$400,000
- 4Forecast operating profit$350,000 × 0.75 - $180,000$82,500
- 5Revenue shortfall$400,000 - $350,000$50,000
Result Summary
Revenue shortfall
$50,000
Accountants Profit Target Calculator
The consultancy needs $400,000 of revenue and has a $50,000 forecast revenue gap.
High-volume business with a 30% contribution margin
Distribution business aiming for $75,000 operating profit.
Input Summary
Target operating profit
$75,000
Fixed costs
$125,000
Variable costs as a percentage of sales
70%
Forecast revenue
$600,000
Calculation Breakdown
- 1Contribution margin100% - 70%30%
- 2Required contribution$125,000 + $75,000$200,000
- 3Revenue needed$200,000 / 0.30$666,666.67
- 4Forecast operating profit$600,000 × 0.30 - $125,000$55,000
- 5Revenue shortfall$666,666.67 - $600,000$66,666.67
Result Summary
Revenue shortfall
$66,666.67
Accountants Profit Target Calculator
The business needs about $666,667 in revenue, around $66,667 above its forecast.
How to Read Your Results
Required revenue is the estimated sales level needed to meet the selected operating profit target.
Additional revenue needed compares the required revenue with the current or forecast revenue entered; it cannot be less than zero.
Forecast operating profit estimates the result at forecast revenue, not at the required revenue target.
Contribution margin shows the proportion of revenue left after variable costs to cover fixed costs and profit.
Variable costs at target revenue are an estimate based on the same variable cost percentage used throughout the calculation.
Assumptions & Important Notes
- All figures relate to the same period, such as one month, quarter, or year.
- The average variable cost percentage applies to both forecast and target revenue.
- Fixed costs do not change over the range of sales shown in each example.
- The examples exclude tax, interest, and exceptional items.
Related Examples
Frequently Asked Questions
How can I use the calculator for a monthly profit target?
Enter monthly fixed costs, a monthly target operating profit, monthly forecast revenue, and the variable cost percentage for that same month.
Why does a business with a 70% variable cost rate need much more revenue?
Its contribution margin is only 30%, so only $0.30 from each revenue dollar is available to cover fixed costs and profit.
What if forecast revenue is above required revenue?
The additional revenue result is zero. The forecast operating profit may exceed the target if the cost assumptions remain unchanged.
Can I model a different sales mix?
Use a blended variable cost percentage that reasonably represents the expected mix, or run separate calculations for materially different product or service lines.
Should I include owner pay in fixed costs?
It depends on how the business defines operating profit. Use a consistent treatment of owner pay, fixed costs, and the target profit across the calculation.
Ready to calculate your own result?
Use the live calculator with your own inputs, timing, and preferences.