The revenue formula
Revenue = Price per Unit × Quantity Sold Revenue is the total amount collected from sales before subtracting any costs — it's not the same as profit. 500 units sold at $20 each is $10,000 in revenue, regardless of what it cost to produce or sell those units.
Solving for price or quantity
The same formula rearranges to answer two other common questions. If you have a revenue target and know how many units you expect to sell, divide revenue by quantity to find the price you'd need to charge: $10,000 ÷ 500 units = $20 per unit. If instead you know the price and need to know how many units to sell, divide revenue by price: $10,000 ÷ $20 = 500 units.
How to calculate total revenue, step by step
For a single product it is one multiplication. For a real business it is a sum of those multiplications, one per line:
Total revenue = Σ (price × quantity) for every product | Product | Units | Price | Line revenue |
|---|---|---|---|
| Standard | 120 | $25.00 | $3,000 |
| Premium | 80 | $40.00 | $3,200 |
| Refill | 300 | $8.00 | $2,400 |
| Total | 500 | — | $8,600 |
Work each line separately and add them. Averaging the three prices first and multiplying by 500 would give ($25 + $40 + $8) ÷ 3 × 500 = $12,167 — wrong by over 40%, because it treats the 300 cheap refills as if they sold in the same numbers as the 80 premium units.
Gross revenue and net revenue are different numbers
Net revenue is revenue after deductions such as returns, discounts, and allowances.
The $8,600 above is gross revenue. If the business has returns, discounts, or allowances, the amount remaining after those deductions is net revenue.| Gross revenue | $8,600 |
| Less returns (20 units @ $25) | −$500 |
| Less discounts and allowances (5%) | −$430 |
| Net revenue | $7,670 |
When comparing revenue figures, check whether they refer to gross or net revenue because the two amounts are not interchangeable.
Sales tax is not revenue
This one catches people filing their first set of accounts. Tax you collect from customers is money held on behalf of the tax authority, not income. On the $8,600 above with 20% VAT, customers hand over $10,320, of which $1,720 is tax and $8,600 is revenue. Sales taxes and VAT collected from customers on behalf of a tax authority are generally not included in the seller's revenue under IFRS and US GAAP.
If you are working backwards from tax-inclusive totals, the sales tax calculator separates the two.
How to calculate revenue per unit
Revenue per unit = total revenue ÷ total units sold For a single product at one price, this is simply the price — the calculation tells you nothing you did not already know. It becomes useful the moment you have more than one price, because then it is a weighted average rather than a price anyone paid.
Using the table above: $8,600 ÷ 500 units = $17.20 per unit. Notice that $17.20 is not $25, $40 or $8. It is not a price at all — it is what the average unit brought in, pulled down by the 300 cheap refills making up 60% of the volume.
Economists call this average revenue, and it is the number that moves when your sales mix changes even though no price did. Sell the same 500 units next month but with 200 premium instead of 80 and the revenue per unit rises sharply, which is worth knowing before congratulating anyone on a price increase that never happened.
Which revenue, and which units?
Be consistent about the pair. Dividing net revenue by gross units mixes two different bases:
- Gross per unit: $8,600 ÷ 500 = $17.20
- Net per unit: $7,670 ÷ 480 units remaining after returns = $15.98
- Mixed, and wrong: $7,670 ÷ 500 = $15.34
The last figure mixes net revenue with gross units sold, so it does not represent either gross revenue per unit or net revenue per unit on a consistent basis.
Revenue per unit is not margin per unit
Revenue per unit says nothing about whether the unit was worth selling. If those refills cost $9 each to make, every one sold loses a dollar while still adding $8 to revenue. To see profit as a percentage of revenue after costs, use the profit margin calculator.
Revenue isn't profit
This is the most common mix-up with revenue figures — a business can have strong revenue and still lose money if costs exceed it. For a fuller picture that accounts for costs, see the Break-even Calculator (fixed and variable costs) or the Profit Margin Calculator (profit as a share of revenue or cost).
Frequently asked questions
How do you calculate total revenue?
Multiply price per unit by quantity sold. For example, 500 units at $20 each gives $10,000 in total revenue. If you sell multiple products at different prices, calculate each product's revenue separately and add the results.
How do you calculate revenue per unit?
Divide total revenue by total units sold. With one product at one price, this returns the price. With several products or prices, it gives the average revenue generated per unit, weighted by how many units of each product were sold.
Does revenue include sales tax?
No. Sales tax or VAT collected from customers on behalf of the tax authority is generally not included in the seller's revenue. For example, on $8,600 of sales with 20% VAT, customers pay $10,320, but the $1,720 VAT is separate from the $8,600 revenue.
Why doesn’t my revenue per unit match any of my prices?
Because it is an average weighted by how many of each product you sold, not a price. It sits between your cheapest and dearest items and shifts whenever the sales mix changes, even if every price stays the same.
Is revenue the same as profit?
No. Profit is what's left after costs and expenses are accounted for. Profit is what's left after costs — a business can have high revenue and still operate at a loss if costs are high enough.
How do I find the price needed to hit a revenue target?
Divide the target revenue by the number of units you expect to sell. A $10,000 target at 500 expected units means charging $20 per unit.