How do you work out target contribution?
submitted by Tim Burr

gandalfini

You find the target contribution by first deciding how much profit you want to make. After that, add your fixed costs to that profit. Then you divide that total by the contribution margin per unit (selling price minus variable cost per unit). It tells you how much contribution you need to hit your target profit.

spritzy

To figure out your target contribution, think about how much money you need to cover your fixed costs and make the profit you want. Look at your sales price minus variable costs per product to see what contribution you get per sale, and figure out how many sales you need to reach your goal.

jellio

You need to determine the sales revenue required to cover all fixed costs and your desired profit.

You're going to subtract the variable costs from the sales revenue to find the contribution, then set a target sales level that ensures this contribution covers fixed expenses plus profit goals.