Padini Chart

Target profit analysis is about finding out the estimated business activities to perform to earn a target profit during a certain period of time. Among these activities, management is especially interested to find out the sales volume required to generate a target profit.

In break-even point analysis article, we used equation method and contribution margin method to calculate break-even point of a company. The same formulas, with a little modification, can be used to calculate the sales both in units and in dollars to earn a target profit during a certain period of time.