Business
Units for a target profit
Treat the desired profit as an additional fixed cost and divide again. The slope never changes, which is the whole insight.
The Formula
Required Units = (Fixed Costs + Target Profit) / Contribution Margin
Treat the desired profit as an additional fixed cost and divide again. The slope never changes, which is the whole insight.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| pi | Target profit before tax | currency | To hit an after-tax figure, gross the target up by dividing by (1 - tax rate) first. |
What Each Symbol Means
picurrency
Target profit before tax
To hit an after-tax figure, gross the target up by dividing by (1 - tax rate) first.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate the break-even point page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate The Break-Even Point, filed under Finance. Every number the guide produces comes from substituting into this one line.