Economics of One Unit - Business concept of the day
Definition: Economics of One Unit (EOU) is a method used to determine whether a business model can be successful (profitable), by calculating if an individual unit of the good or service would be profitable.
Example: The economics of one unit of sale is calculated by subtracting the variable expenses for a unit from the unit’s selling price. For example, if you are planning to enter the garment manufacturing business, to calculate EOU, you will calculate the cost of producing on unit & compare it with your selling price. If the result is positive, this business is thought to be profitable.
Business Insight: It help calculating the contribution margin. This is the amount per unit that a product contributes toward the company’s profitability before the fixed expenses are subtracted.
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