Target Revenue Calculator

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Reviewed by: Dr. Elias Vance, Financial Economist
Dr. Vance specializes in corporate finance and macroeconomics, ensuring the Target Revenue formulas are academically sound and applicable to market forecasting.

The **Target Revenue Calculator** is a critical strategic tool for setting pricing, production, and sales goals. It helps you determine the necessary sales revenue to achieve a specific financial objective (such as a target profit margin). Enter any three of the four variables—Target Revenue Margin (F), Price (P), Variable Cost (V), or Quantity (Q)—to instantly solve for the missing one.

Target Revenue Margin (F) ($)

Selling Price Per Unit (P) ($)

Variable Cost Per Unit (V) ($)

Sales Quantity (Q) (Units)

Target Revenue Formula

This calculator relies on the fundamental relationship between total revenue, total costs, and profit. Here, ‘F’ represents the total target dollar amount that must be generated by the contribution margin:

$$Q = \frac{F}{P – V} \quad \text{(Solve for Sales Quantity)}$$

$$F = Q \times (P – V) \quad \text{(Solve for Target Revenue Margin)}$$

$$P = \frac{F}{Q} + V \quad \text{(Solve for Price)}$$

$$V = P – \frac{F}{Q} \quad \text{(Solve for Variable Cost)}$$

Formula Source: Investopedia – CVP Analysis

Key Variables Explained

**F (Target Revenue Margin):** The combined dollar amount of Fixed Costs plus the Desired Target Profit.
**P (Price):** The selling price per unit of the product or service.
**V (Variable Cost):** The cost incurred per unit of product, which varies directly with the volume of production.
**Q (Sales Quantity):** The number of units that must be sold to generate the Target Revenue Margin (F).

Related Financial Planning Calculators

Optimize your revenue streams and manage expenses with these related tools:

What is Target Revenue?

Target Revenue is the specific total income a business aims to generate from sales over a given period to cover all costs and achieve a desired level of profit. It is a more goal-oriented metric than the break-even point, which only seeks to cover costs. Calculating target revenue is fundamental to budget preparation and performance measurement across sales and finance departments.

In the context of this calculator, the ‘Target Revenue Margin (F)’ is the amount that must be collected from the contribution margin of all units sold. This target must cover all fixed operating expenses before any profit can be recorded. Once fixed costs are covered, the remaining contribution margin becomes the net profit.

How to Use the Target Revenue Calculator (Example)

Define the Target Revenue Margin (F)
A business needs to cover $40,000 in Fixed Costs and aims for $10,000 in profit. The Target Revenue Margin (F) is $40,000 + $10,000 = $50,000.
Set Price (P) and Variable Cost (V)
The product is priced at $100 (P), and the variable cost per unit is $60 (V).
Determine Contribution Margin
The contribution margin is calculated as $100 (P) – $60 (V) = $40. Each unit sold contributes $40 toward the $50,000 goal.
Solve for Sales Quantity (Q)
Divide the Target Revenue Margin by the Contribution Margin: $50,000 / $40 = 1,250 units. The business must sell 1,250 units to achieve its target profit.

Frequently Asked Questions

How does Target Revenue differ from Gross Revenue?

Gross Revenue is the total income generated from sales before any costs are deducted. Target Revenue is a *goal*—the specific level of sales income you aim for after considering all costs and desired profit margins.

Can this calculator determine the price needed for a target?

Yes. If you know your Target Revenue Margin (F), the required Sales Quantity (Q), and the Variable Cost (V), the calculator will determine the minimum Selling Price (P) required to meet that margin goal.

What are the risks of using the Target Revenue metric?

The primary risk is basing the target on inaccurate cost estimations. If fixed or variable costs are underestimated, hitting the calculated Target Revenue will not result in the expected profit level.

How often should I recalculate my Target Revenue?

You should recalculate whenever there is a significant change in any of the core variables: a price change, a spike in raw material costs (Variable Cost), or an increase in overhead (Fixed Costs).

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