Unit Sales

What Are Unit Sales?

The unit sales number on a balance sheet addresses the total sales of a product in a given period. This sales data is utilized to decide the price point that takes into consideration the best profit per unit thinking about the real cost of production.

To stock analysts, unit sales are an important measure of a product's contribution to a company's balance sheet.

Figuring out Unit Sales

Unit sales show up on a company's income statement. They are inspected over various accounting periods, like month to month, quarterly, or yearly.

Inside, company marketing executives could utilize this figure to assist with deciding the right price point for a product.

Analysts use it to assess a product's real contribution to the company's main concern.

In addition to other things, an analyst can see whether a product is facing margin pressure. For instance, accept XYZ Corp. has $250 million in revenue, and it sold 5 million units. By taking the ratio of the two ($250 million/5 million), the analyst can see that the average selling price (ASP) is $50 per unit. Assume that in the next reporting period that equivalent firm has an average selling price of $48. The analyst would think about this basically a red flag that calls for more research.

Contrasting unit sales consistently may assist analysts with deciding whether a company is moving in a positive heading. For instance, Apple was predicted to sell roughly 235 million units of its iPhone during the 2015 fiscal year when the iPhone market was developing. These predicted sales were an emotional increase over the 2014 fiscal year sales of around 170 million units worldwide. By 2019, the figure had dropped to around 38 million.

This didn't hurt Apple's stock. Truth be told, its share price nearly significantly increased in a similar time span. Yet, it proposes that the smartphone industry as a whole is arriving at saturation point.

Break-Even Point (BEP)

One part of unit sales analysis is the break-even quantity. Break-even quantity is the number of units that must be sold before the company encounters no loss (and no profit) by delivering it.

Inside, the unit sales figure is utilized to decide the right price point for a product.

As production costs can differ in view of quantity, the price of an individual unit might should be adjusted to guarantee the company breaks even on its investment. Any revenue past the break-even point (BEP) is profit, while a total that falls below that point is a loss.

Break-even analysis incorporates different suppositions in regards to fixed and variable costs. These suppositions might lead to error in the evaluations on the grounds that the relationship among sales and fixed or variable costs isn't linear 100% of the time. For instance, it very well might be feasible to buy materials at lower costs when ordered at a higher volume, while putting away a bigger quantity might raise the fixed costs associated with material storage.

Real-World Example of Unit Sales

To return to Apple, in November 2018, the company announced that it would never again give unit sales numbers in its earnings reports. This news occurred after Apple had announced final quarter results that surpassed expectations.

On account of Apple, iPhone unit sales are dropping. Nonetheless, balancing this dynamic, Apple is expanding its prices for its iPhones and different products. Hence, the company is zeroing in on ways of expanding revenues in a time of more slow unit sales growth.

Apple is worried that unveiling unit sales will make investors question Apple's ability to sell gadgets. All things being equal, the company plans to zero in on services revenue, which addressed 16% of its quarterly revenue and developed 17% year-over-year, as per Jason Sonenshine, a markets columnist for TheStreet.com.

Features

• Service companies are less worried about unit sales on the grounds that their output may be benchmarked subjectively as opposed to quantitatively.
• Unit sales are helpful for deciding the best price point for a product, considering in production costs.
• Utilizing unit sales, analysts can decide the average selling price over chance to monitor sales performance.