Profit Target Calculator (Selling Price and Revenue)
Turns a cost and a wanted profit margin into the selling price, and shows the revenue needed to hit a target profit.
Recent
Formula
How the calculation works
The tool converts the margin percentage to a decimal and subtracts it from one to get the cost share of the price.
It divides the cost price by that share to return the selling price that delivers the wanted margin.
It divides the target profit by the margin decimal to show the revenue needed to reach that profit.
Common mistakes
- Adding the margin percentage to the cost, which gives a lower price than a true margin calculation.
- Setting a margin at or above one hundred percent, which has no valid selling price and is rejected.
When to use it
- Set a selling price that guarantees the margin you want on each unit you sell.
- Work out the revenue needed this month to reach a fixed profit goal.
Worked example
A cost of 800 taka and a 20 percent margin give a selling price of 1000 taka, and a target profit of 20000 taka needs revenue of 100000 taka.
Common questions
Why divide by one minus the margin?
The margin is a share of the selling price, so the cost must be divided by the part of the price that is not profit.
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