Contribution & Target Profit Pricing Calculator

How the contribution & target profit pricing calculator works

Unit contribution is selling price less variable unit cost. Profit at volume is unit contribution × volume − fixed costs. The contribution percentage uses selling price as its denominator and is undefined when price is zero. Enter prices, costs and target profit on one consistent period and currency basis.

All money inputs round to cents first. A sufficient target price is variable cost + (fixed costs + target profit) ÷ entered whole volume, rounded upward to cents. The target volume divides fixed costs plus target profit by positive unit contribution and rounds upward to a whole unit. Zero volume makes the price result unavailable.

The model assumes identical units, stable variable cost and no capacity or demand constraint. Nonpositive contribution cannot cover a positive fixed-cost-plus-target amount. This is not a market-price recommendation and contribution is not automatically the same as accounting gross margin.

Worked example

At price 100 and variable cost 60, unit contribution is 40. One hundred units less 1,000 fixed costs gives 3,000 profit. A 2,000 profit target needs a sufficient price of 90 at that volume, or 75 whole units at the current price. Raising the target to 3,000 makes the sufficient price 100.

Sources and assumptions

The source material explains the underlying calculation or pricing structure. Entered prices, costs, schedules and scenario choices are your assumptions; this tool does not obtain supplier quotes or predict actual results.

• SBA: business cost and financial planning