31 August, 00:51

# Khan Corporation has budgeted the unit sales for April to be 5,000 units. The sales price is \$25 per unit, and production costs are \$10 per unit. Monthly utility expenses are estimated to be \$2,000 plus \$2 per unit, whereas selling expenses are estimated to be \$12,000. The company pays a monthly rent of \$2,000. What is the net operating income in the company's planning budget

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1. 31 August, 01:54
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Answer: The Net Operating Income (NOI) is \$49,000

Explanation: The formula for calculating Net Operating Income is given as:

NOI = RR - OE

Where:

RR = Real estate Revenue.

OE = Operating Expenses.

From the question above, we can calculate the RR by multiplying the total units by the price of one unit, thus:

RR = 5,000 X \$25

RR = \$125,000

To calculate the OE, we will add all the expenses incurred by the corporation, thus:

Production costs = 5,000 units X 10 = \$50,000.

Monthly utility expenses = \$2,000 + (\$2 X 5000 units)

= \$2,000 + \$10,000 = \$12,000.

Selling expenses = \$12,000.

Monthly rent = \$2,000.

Therefore total OE = \$50,000 + \$12,000 + \$12,000 + \$2,000

OE = \$76,000.

Having gotten the RR and OE, we can now calculate for NOI thus:

NOI = RR - OE

NOI = \$125,000 - \$76,000

NOI = \$49,000.