In this example, it states that because of this enployees were rewarded for reducing the unit cost of the product, which meant cutting in to quality. This led to sales declining because custoners were less interested in ab inferior product.

If management had looked less at the "how much profit can we squeeze out of 1 gallon" angle, and more "how much profit can we make overall", they might have made different decisions, such as preserving the quality of the product, they may have done better overall.

Unit profit is one factor in overall profit / revenue, but # of units solds is equally as important...it's a balancing act.