Your target revenue tells you how much money you need to bring in to achieve a desired profit. Using the expected sales price and your target sales volume, you can estimate the revenue levels you'll need to achieve. This can act as a benchmark against which to measure your success.
Calculating Target Revenue
Before calculating your target revenue, you need to know your target sales volume. If you don't know your target sales volume, you simply need to add your fixed costs --- or overhead -- to your target profit and divide the sum by your cost per unit. For example, if you have a target profit of $75,000, fixed costs of $25,000 and a unit cost of $50, then your target sales volume would be 2,000 units. To calculate your target revenue, you simply multiply your target sales volume by the expected selling price. For example, if you have a target sales volume of 2,000 units and they sell for $100 a piece, then your target revenue is $200,000.
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