Sales needed for a target profit
Treat the profit you want as one more cost that contribution has to cover. Work out the units and the sales revenue needed to reach it.
Task 1Units for a target profit4 questions
To break even, contribution must cover the fixed costs. To make a target profit, it must cover the fixed costs and the profit as well.
The units needed are fixed costs plus target profit, divided by the contribution from one unit.
Larkfield's fixed costs are £13,500 a month. Each candle sells for £15 and gives a contribution of £9. The owner wants a profit of £6,300 a month.
Task 2The contribution to sales ratio4 questions