User Tools
Per Unit Sold Report
How to Read a Pro Forma Per Unit Analysis Report:
A pro forma per unit analysis report for a product helps you determine:
- How much of a contribution each product in your portfolio is making to your bottom line. Just look at the bottom line of the report.
- How many units of a product you need to sell at a particular price for the product to “pay for itself.” This is called a cost-volume-profit analysis. Increase the units sold of the product until the bottom line of this report becomes positive. Or set the units sold of the product to the value that makes the bottom line of this report zero and you have found the critical inflection point.
- What price you need to set for a product so it will “pay for itself.” Increase the price of the product until the bottom line of this report becomes positive. Or set the price of the product to the value that makes the bottom line of this report zero and you have found the critical inflection point.
An example of the report is shown below. It is formatted just like an income statement but shows the contribution to the company's bottom line of just one unit sold of just one product. Let's look at fiscal year 1 of the figure below. By looking down the first column, we see that the revenue contribution for one unit sold of this product is precisely the average price of the product across all markets: in this case, $35. To calculate the cost of goods sold contribution for one unit sold, we have divided the total cost of goods sold for this product in all markets (from the product-organized pro forma income statement) and divided it by total number of units sold of this product. For all other items on the report, we have taken the corresponding items from the pro forma income statement, divided it by
(Total Revenues for This Product / Total Revenues for Company)
that is, by the proportion of company revenues attributable to this product, and then divided the result by the number of units sold of this product.
This gives us the contribution of one item sold for each of these items. It is unlikely that an investor will ask to look at this report, but it will certainly be helpful to you as you investigate which products make sense to include in your company portfolio and which ones make sense to purge.
| Per Unit Analysis for New Company, Inc. (Product #1) | ||||||
| Fiscal Year 1 | Fiscal Year 2 | Fiscal Year 3 | Fiscal Year 4 | Fiscal Year 5 | ||
| Average Price | $ 35 | $ 42 | $ 50 | $ 60 | $ 73 | |
| Cost of Goods Sold | 12 | 13 | 15 | 16 | 18 | |
| Gross Profit Per Unit | 23 | 29 | 36 | 45 | 55 | |
| Pro Rata Expenses | ||||||
| General & Administrative | 7 | 8 | 8 | 9 | 10 | |
| Manufacturing & Production | 3 | 3 | 4 | 4 | 4 | |
| Marketing & Sales | 7 | 8 | 8 | 9 | 10 | |
| Research & Development | 10 | 10 | 10 | 10 | 10 | |
| Total Expenses | 27 | 29 | 31 | 33 | 35 | |
| EBITDA | (4) | 0 | 5 | 12 | 20 | |
| Pro Rata Depreciation | 2 | 2 | 2 | 2 | 2 | |
| EBIT | (6) | (2) | 3 | 10 | 18 | |
| Pro Rata Interest | 0 | 0 | 0 | 0 | 0 | |
| Pro Rata Provision for Income Taxes | 0 | 0 | 0 | 3 | 3 | |
| Earnings After Tax (EAT) | $ (6) | $ (2) | $ 3 | $ 7 | $ 15 | |
Questions:
What should I do if EBITDA on this report is negative?
What is "Unallocated from Labor" and where do it come from?
How do I add or remove a year (column) to/from this report?
How do I suppress a row of all zeros from this report?
