Q20-17RQ - Horngren'S Financial And Managerial Accounting

Question

Question: What is target profit?

Step-by-Step Solution

Answer

Answer

 

The target profit is the management’s expected goal.

 

Step 1: Meaning of target profit

The target profit is the management’s expected goal that results from net sales revenue reduced by variable costs and fixed costs.

Step 2: How to calculate target profit

Target profit can be calculated using the same methods used to calculate breakeven sales.

1. Equation approach
2. Contribution margin approach
3. Contribution margin ratio approach