Target net income is the income objective set by the management. It indicates the sales necessary to achieve a specified level of income.
The formulas for determining sales required to earn target net income are:
Required sales = Variable costs + Fixed costs +Target net income
Required sales in units = (Fixed costs + Target net income) ÷ Contribution margin per unit
Required sales in dollars = ( Fixed costs + Target net income) ÷ Contribution margin ratio.