Target Sales Volume Calculator

Target Sales Volume Formula

The core relationship used is an extension of the Break-Even Point (BEP) formula. When solving for Target Sales Volume (Q), Fixed Costs (F) are replaced by the sum of Fixed Costs and Target Profit.

Formula to Solve for Target Sales Units (Q)

Formula to Solve for Fixed Costs & Target Profit (F)

Formula to Solve for Price (P)

Formula to Solve for Variable Cost (V)

Formula Source: Investopedia – Break-Even Point

Variables Explained

The variables are used within the Cost-Volume-Profit (CVP) analysis framework:

• **F (Fixed Costs & Target Profit):** This input is either pure Fixed Costs (for BEP) or the sum of Fixed Costs PLUS your desired Target Profit (for Sales Volume).
• **P (Price Per Unit):** The selling price of one unit of your product or service.
• **V (Variable Cost Per Unit):** Expenses that fluctuate directly with the production volume (e.g., raw materials).
• **Q (Target Sales Units):** The number of units that must be sold to cover the total required funds (Fixed Costs + Target Profit).

Related Calculators

Explore other financial planning tools:

• Margin of Safety Calculator
• Degree of Operating Leverage Calculator
• Sales Mix Analysis Calculator
• Contribution Margin Calculator

What is the Target Sales Volume Calculator?

The Target Sales Volume Calculator is an essential financial tool derived from Cost-Volume-Profit (CVP) analysis. It moves beyond simply finding the break-even point (where profit is zero) to calculate the minimum number of units a business must sell (Target Sales Volume, Q) to not only cover all fixed and variable costs but also to achieve a predetermined financial profit goal.

This calculator is particularly valuable for setting annual sales targets, evaluating new product feasibility, and performing “what-if” scenarios, such as determining how a price increase (P) affects the volume (Q) needed to hit a specific profit target. By leaving any one of the four variables blank, you can reverse-engineer the required Fixed Costs (plus profit), Price, or Variable Cost necessary to hit a target sales volume.

How to Calculate Target Sales Volume (Example)

Here is a step-by-step example of how the calculation works when solving for Units (Q):

1. **Identify Fixed Costs and Target Profit:** A company has $100,000 in Fixed Costs and a Target Profit of $50,000. Therefore, F = $150,000.
2. **Determine Price and Variable Costs (P & V):** The product sells for $75 (P) and has a Variable Cost of $25 (V).
3. **Calculate Contribution Margin:** The contribution margin is $75 – $25 = $50 per unit.
4. **Apply the Formula:** Q = (Fixed Costs + Target Profit) / Contribution Margin. Q = $150,000 / $50.
5. **Find the Target Sales Volume (Q):** Q = 3,000 units. The company must sell 3,000 units to cover costs AND achieve the $50,000 profit goal.

Frequently Asked Questions (FAQ)

How does this tool handle the Target Profit?

For the purpose of the core formula (Q = F / (P-V)), the input labeled “Fixed Costs & Target Profit (F)” should be the sum of your actual fixed costs plus the profit goal you wish to achieve. The formula then solves for the volume (Q) required to cover this total required funding.

Can I use this to find the break-even point?

Yes. To find the break-even point (where Profit = $0), simply enter only your actual Fixed Costs into the “Fixed Costs & Target Profit (F)” field, leaving the Target Profit component at zero.

What is the difference between this and Margin of Safety?

Margin of Safety is the difference between actual (or budgeted) sales and the break-even sales. The Target Sales Volume Calculator is used *before* sales occur to set a required goal, while Margin of Safety is often used *after* setting goals to measure risk.

What if the variable cost is zero?

A variable cost of zero (V=0) is extremely rare but mathematically possible. The calculator will treat the Price (P) as the entire Contribution Margin. If V=0 and F > 0, the Quantity (Q) required will be F / P.