Question

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

Answer 1

$49,000

Step-by-step explanation:

Net operating income (NOI) is usually used in real estate, since it doesn't take in account all the production costs, but it can also work for manufacturing firms (like this one) that do not have depreciation or amortization costs.

NOI = total revenue - operating expenses

total revenue = 5,000 x $25 = $125,000

operating expenses = production costs (5,000 x $10) + utilities ($2,000 + 5,000x$2) + selling expenses ($12,000) + rent ($2,000) = $50,000 + ($2,000 + $10,000) + $12,000 + $2,000 = $76,000

net operating expenses = $125,000 - $76,000 = $49,000

Answer 2

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.