Units and Sales to Earn Target Profit Once firms know their breakeven point, they can figure out how many units must be sold to earn a target profit. To do that, simply add the target profit to the total fixed costs in the numerator of the breakeven in units or breakeven in sales dollars equations: Breakeven units = (Total fixed costs + Target profit)/(Price - Unit variable cost) Breakeven sales dollars = (Total fixed costs + Target profit)/Contribution margin ratio Example: Kalman Company makes vases. Last year, Kalman sold 5,900 vases at a price of $11.89 and had the following information on costs: Unit direct materials $1.74 Unit direct labor 0.47 Unit variable overhead 0.20 Unit selling expense 0.64 Total fixed overhead $13,275 Total selling and administrative expense $24,308 Kalman's operating income last year was . Suppose Kalman wants to earn operating income of $19,877. How many units (rounded to the nearest unit) must be sold to achieve that? Units = (Total fixed cost + Target income)/(Price - Unit variable cost) = ($37,583 + $19,877)/($11.89 - $3.05) = 6,500 What level of sales revenue would result in operating income of $19,877? . We can show that selling 6,500 units results in operating income of $19,877 by constructing an income statement. Sales ($11.89 6,500) $77,285 Total variable cost ($3.05 6,500) 19,825 Contribution margin $57,460 Total fixed cost 37,583 Operating income $19,877 If Kalman wanted to earn operating income of $22,897 rather than $19,877, the necessary number of units sold would be . If Kalman's contribution margin ratio were 40%, the sales dollars to earn $19,877 in operating income would be .