Unit Sales: Definition, Calculation, and Example

What Are Unit Sales?

On a balance sheet, unit sales represent the total sales of a product in a given period. This information is used to determine the price point for profit.

Key Takeaways

• Unit sales help determine the optimal price point for a product.
• Unit sales are examined over different accounting periods (monthly, quarterly, yearly).
• A company can forecast future unit sales by multiplying the expected number of units by the selling price.

Understanding Unit Sales

Unit sales appear on a company’s income statement and are examined over different accounting periods. Companies use this figure to determine the right price for a product.

Unit sales determine if a product is facing margin pressure. If XYZ Corp. has $250 million in revenue and has sold 5 million units, the average selling price is $50 per unit. A decrease in average selling price may be a red flag for the company.

Comparing unit sales annually helps analysts determine a company’s progress. In 2021, Tesla’s sales of 936,000 electric vehicles were up 87% from 2020. The company sold 308,600 units in the final quarter of 2021 alone.

Supply chain breakdowns since the onset of the COVID-19 pandemic in 2020 were debilitating for automakers. However, Tesla’s Elon Musk bypassed the semiconductor shortage by using new chip designs and rewriting software.

Unit Sales and Production

The break-even point is where the cost of production equals the revenue for one unit.

To ensure at least a break-even point is achieved, the price of a unit is often adjusted based on production costs. Revenue generated per unit beyond the break-even point is called profit.

Beyond the break-even point, companies analyze marginal cost, the change in total cost when production increases.

In production, companies consider economies of scale, cost advantages when production becomes efficient. Costs can be fixed, such as insurance and licenses, or variable, like packaging supplies.

Unit Sales Forecasting

A company can forecast future sales by multiplying expected units by the selling price.

Past financial results and cost of goods sold help make reliable assumptions about future sales.

Major corporations often predict sales using this data. Tesla, for example, is expected to produce about 2 million vehicles in 2023.

Apple stopped reporting unit sales numbers in 2018 as they believed it didn’t reflect their business’s strength.

What Is Sales Revenue?

Sales revenue equals the total units sold multiplied by the average price per unit.

What Is the Difference Between Unit Sales and Sales Volume?

Sales volume is the number of units sold during a specific accounting period.

What Are LIFO and FIFO?

LIFO (Last In, First Out) and FIFO (First In, First Out) are two distinct accounting methods for recording inventory. FIFO sells units in the order they were purchased or produced, while LIFO sells the most recently produced units first.

The Bottom Line

The unit sales data on a balance sheet indicates the actual numbers of products sold. Forecasting future sales and comparing unit sales over time helps industry analysts assess a company’s progress.