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15 June, 17:20

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. 15 June, 17:25
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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.
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