Calculate expected profit, break-even sales, ROI, margin, markup and contribution margin from the selected inputs. Use monetary amounts consistently in USD. Outcome probabilities must total 100%; contribution margin excludes fixed costs, while net profit includes them.
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Expected Profit Formula
The following formula is used to calculate the Expected Profit.
- Where EP is the Expected Profit ($)
- EV is expected revenue before costs ($)
- EC is the expected cost ($)
To calculate expected profit from gross expected revenue, subtract expected cost. If outcomes already represent net profit or loss after costs, expected profit is their probability-weighted sum; do not subtract those costs again.
How to Calculate Expected Profit?
The following example problems outline how to calculate Expected Profit.
Example Problem #1:
- First, determine the expected value ($). In this example, the expected value ($) is given as 123.
- Next, determine the expected cost ($). For this problem, the expected cost ($) is given as 23.
- Finally, calculate the Expected Profit using the equation above:
EP = EV - EC
The values given above are inserted into the equation below:
EP = 123 - 23 = 100 ($)
Example Problem #2:
The variables needed for this problem are provided below:
expected value ($) = 60
expected cost ($) = 20
Entering these values and solving gives:
EP = 60 - 20 = 40 ($)
