What is the sales revenue formula and how is it used?

Revolut Contributor

 · 09/22/2020  · 09/22/2020

In this article we are covering everything you need about the sales revenue formula. Its importance, use and common errors.

  • Why do we need to know sales revenue?
  • What is it used for?
  • Are there common errors people tend to make?

Sales revenue is the total income generated by the sale of goods and or services related to a given company’s operation. It’s often referred to as the ‘top line’ because, in accounting, it sits at the top of the income statement.

Therefore, it’s the total amount of income generated by sales to the company before any expenses or costs are subtracted from the calculation. In this blog post, we explored sales revenue and the difference between vs income. Here, we’ll dive into the sales revenue formula.

What’s the sales revenue formula

The sales revenue formula is:

Price of Goods x Quantity of Goods sold = Sales Revenue

For example, if in one year, you sold 100 shoes at £30 each, your sales revenue would be:

£30 x 100 = £3,000

If you have multiple goods or services, the sales revenue formula follows this pattern:

(Price of A x quantity of A sold) + (Price of B x quantity of B sold) + (Price of C x quantity of C sold) … = Sales Revenue

For example, if you sold 100 pairs of shoes for £30 and 100 pairs of sunglasses for £20, your sales revenue would be: (£30 x 100) + (£20 x 100) = £5,000

Break-even sales revenue formula

Break-even sales revenue is the amount of sales revenue that covers a business’ underlying fixed expenses and the variable expenses associated with the sales of a company. It is important to understand your break even sales level, so you know the minimum amount of sales you have to generate to avoid losses. The break even sales revenue formula is:

Break-even sales = Fixed Costs ÷ Contribution Margin

Where contribution margin = 1 - (Variable Costs ÷ Revenues)

The contribution margin here represents the incremental profit earned for each product/ unit you sold.

You can easily use excel to help you compute your sales revenue formula or your break even sales revenue formula.

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About the author

Wear My Freedom was founded by Alexandra Pluthero and is on a mission to become the world’s most comfortable D+ underwear company. In 2020, it launched its debut Freedom Bra®, a supportive, wire-free bra, specifically designed for D+ cup sizes. Providing genuine support and lift, the Freedom Bra® offers a revolutionary new option for those seeking larger cup sizes. Alexandra and Wear My Freedom don’t just have a focus on comfort, but are passionate about modernising the lingerie industry, and supporting women where it matters, through bras, body positivity and their bra donation service.