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?



To find the **net operating income (NOI)** for Khan Corporation's planning budget, we need to compute revenues and expenses and then subtract total expenses from total revenues. Here are the steps:

### Step 1: Compute Total Revenues
The **total revenue** is calculated by multiplying the number of units sold by the sales price per unit:
\[
\text{Total Revenue} = \text{Unit Sales} \times \text{Sales Price Per Unit} = 5,000 \times 25 = 125,000
\]

### Step 2: Compute Variable Expenses
1. **Production Costs**: 
   \[
   \text{Production Costs} = \text{Unit Sales} \times \text{Cost Per Unit} = 5,000 \times 10 = 50,000
   \]

2. **Utility Expenses** (variable part): 
   \[
   \text{Variable Utility Expense} = \text{Unit Sales} \times \text{Variable Utility Cost Per Unit} = 5,000 \times 2 = 10,000
   \]

### Step 3: Compute Fixed Expenses
1. **Utility Expenses** (fixed part): 
   \[
   \text{Fixed Utility Expense} = 2,000
   \]

2. **Selling Expenses**: 
   \[
   \text{Selling Expenses} = 12,000
   \]

3. **Rent Expenses**: 
   \[
   \text{Rent Expense} = 2,000
   \]

### Step 4: Total Expenses
Now, we can calculate the total expenses by summing up the variable and fixed expenses:

\[
\text{Total Expenses} = \text{Production Costs} + \text{Variable Utility Expense} + \text{Fixed Utility Expense} + \text{Selling Expenses} + \text{Rent Expense}
\]
\[
\text{Total Expenses} = 50,000 + 10,000 + 2,000 + 12,000 + 2,000 = 76,000
\]

### Step 5: Compute Net Operating Income (NOI)
Finally, subtract the total expenses from the total revenue to get the **Net Operating Income**:
\[
\text{NOI} = \text{Total Revenue} - \text{Total Expenses} = 125,000 - 76,000 = 49,000
\]

### Conclusion:
The **net operating income** (NOI) for Khan Corporation's planning budget is **$49,000**.

---

Do you want further details or have any questions?

Here are 5 related questions:
1. How does changing the production cost per unit affect NOI?
2. What if the selling price increases to $30 per unit?
3. How would a decrease in utility costs affect the NOI?
4. What would happen if sales volume increased by 1,000 units?
5. How do fixed expenses impact profitability as sales volume increases?

**Tip:** Fixed costs remain the same regardless of production level, but increasing sales can spread those costs over more units, improving profitability.

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?

Learn how to calculate the net operating income (NOI) for Khan Corporation, given unit sales of 5,000 units at $25 per unit. Includes revenue, expense breakdowns, and step-by-step calculations of total expenses and NOI. Suitable for students in Grades 10-12.

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