Break-Even With Target Profit Calculator

How it is calculated

Contribution margin per unit is price − variable cost. The profit target you type is after tax, so the tool first converts it into the pre-tax profit that must be earned: pre-tax target = target ÷ (1 − tax rate ÷ 100). Required units are (fixed costs + pre-tax target) ÷ contribution margin, rounded up to whole units, and required revenue is the unrounded units times the price. Plain break-even units are fixed costs ÷ contribution margin. The margin of safety compares your planned units with the required units, not with plain break-even: (planned − required) ÷ planned × 100, and it is 0 when planned units are 0. If price does not exceed variable cost, or the tax rate is 100% or more, there is no result.

Common mistakes

• Entering a pre-tax profit target: the field is after-tax, and the tool grosses it up, so typing a pre-tax figure overstates the units needed.
• Entering the tax rate as a fraction (0.25) instead of a percentage (25): 0.25% hardly changes the target, so the answer looks too optimistic.
• Putting total cost per unit (including a share of fixed costs) in the variable-cost field; that double-counts fixed costs.
• Reading the margin of safety as a distance above plain break-even: here it measures planned sales against the units needed for the profit target, so it can be negative even when you are above break-even.
• Entering a variable cost equal to or above the price: there is no contribution margin and no result.