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Methodology

Target Profit Units & Revenue Planner methodology

Find the weighted sales and revenue target for a named profit, then compare it with a scarce-resource limit.
Duc Nguyen X.By Duc Nguyen X.· Founder, Margin101Last reviewed: View update historyMethodology

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Weighted Price Ex Tax
weightedPriceExTax = A price × A mix + B price × B mix

Where

weightedPriceExTax
Weighted Price Ex Tax (currency units, ex tax)Source: Calculated output
Weighted Contribution Per Composite Unit Ex Tax
weightedContributionPerCompositeUnitExTax = A contribution × A mix + B contribution × B mix

Where

weightedContributionPerCompositeUnitExTax
Weighted Contribution Per Composite Unit Ex Tax (currency units, ex tax)Source: Calculated output
Target Composite Units
targetCompositeUnits = ceil((fixed costs + target profit) / weighted contribution)

Where

fixedCostsExTax
Fixed costs (currency units/planning period, ex tax)Source: Business record
targetProfitExTax
Target profit (currency units/planning period, ex tax)Source: User assumption
weightedContributionPerCompositeUnitExTax
Weighted Contribution Per Composite Unit Ex Tax (currency units, ex tax)Source: Calculated output
targetCompositeUnits
Target Composite Units (whole composite units/planning period)Source: Calculated output
targetContributionExTax
Target Contribution Ex Tax (currency units, ex tax)Source: Calculated output
Target Revenue Ex Tax
targetRevenueExTax = target composite units × weighted price

Where

weightedPriceExTax
Weighted Price Ex Tax (currency units, ex tax)Source: Calculated output
targetCompositeUnits
Target Composite Units (whole composite units/planning period)Source: Calculated output
targetRevenueExTax
Target Revenue Ex Tax (currency units, ex tax)Source: Calculated output
Weighted Constraint Per Composite Unit
weightedConstraintPerCompositeUnit = A resource × A mix + B resource × B mix

Where

weightedConstraintPerCompositeUnit
Weighted Constraint Per Composite Unit (resource units/composite unit)Source: Calculated output
Constraint Limited Composite Units
constraintLimitedCompositeUnits = floor(available resource / weighted resource use)

Where

availableConstraintUnits
Available resource (resource units/planning period)Source: Business record
weightedConstraintPerCompositeUnit
Weighted Constraint Per Composite Unit (resource units/composite unit)Source: Calculated output
constraintLimitedCompositeUnits
Constraint Limited Composite Units (whole composite units/planning period)Source: Calculated output
Constraint Capacity Gap Units
constraintCapacityGapUnits = constraint-limited units − target composite units

Where

targetCompositeUnits
Target Composite Units (whole composite units/planning period)Source: Calculated output
constraintLimitedCompositeUnits
Constraint Limited Composite Units (whole composite units/planning period)Source: Calculated output
constraintCapacityGapUnits
Constraint Capacity Gap Units (composite units/planning period)Source: Calculated output
Target Contribution Ex Tax
targetContributionExTax = target composite units × weighted contribution

Where

weightedContributionPerCompositeUnitExTax
Weighted Contribution Per Composite Unit Ex Tax (currency units, ex tax)Source: Calculated output
targetCompositeUnits
Target Composite Units (whole composite units/planning period)Source: Calculated output
targetContributionExTax
Target Contribution Ex Tax (currency units, ex tax)Source: Calculated output
Target Operating Profit Ex Tax
targetOperatingProfitExTax = target contribution − fixed costs

Where

fixedCostsExTax
Fixed costs (currency units/planning period, ex tax)Source: Business record
targetProfitExTax
Target profit (currency units/planning period, ex tax)Source: User assumption
targetContributionExTax
Target Contribution Ex Tax (currency units, ex tax)Source: Calculated output
targetOperatingProfitExTax
Target Operating Profit Ex Tax (currency units, ex tax)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

The worked rows below come directly from the registered engine and visible default fixture.

Calculation and outputs

Example

The worked rows below come directly from the registered engine and visible default fixture.

Weighted Price Ex Tax
92 currency units
Weighted Contribution Per Composite Unit Ex Tax
56 currency units
Target Composite Units
150 units
Target Revenue Ex Tax
13,800 currency units
Weighted Constraint Per Composite Unit
1.6 units
Constraint Limited Composite Units
125 units
Constraint Capacity Gap Units
-25 units
Target Contribution Ex Tax
8,400 currency units
Target Operating Profit Ex Tax
2,800 currency units

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

Target composite units translates the profit target into a weighted sales threshold and checks it against the scarce-resource limit.

3. Validation and boundary checks

  • All inputs must be finite and within the visible boundaries.
  • Costs, revenue and contribution use one consistent ex-tax basis and planning period.
  • Whole-unit thresholds round upward only where the named engine formula requires it.

4. Assumptions and source classification

  • All prices, costs, demand limits and capacity values are user-supplied records or explicit scenarios.
  • Allocated costs remain visible and separate from avoidable costs.
  • The global workflow infers no market benchmark, policy threshold or future demand.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • The model does not forecast demand, implementation timing, service quality or strategic fit.
  • It does not replace accounting, tax, legal or financial advice.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the Target Profit Units & Revenue planner and methodology.

Related reading

Guides to interpret the decision and its assumptions.

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