Question

1-a. how much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,100 and monthly sales increase by $14,400?

Answer 1

Net operating income will increase/decrease per month if the monthly advertising budget increases by $8,100 and monthly sales increase by $14,400, the net operating income will decrease by $(1620)

Net operating income determines the revenue and profitability of invested actual property assets after subtracting essential operating fees. The system works by using succinctly considering all profits a property makes minus all of the general prices. for instance, a assets might also earn money from tenant rents and a coin laundry system.

To calculate net operating income increase/decrease follow the following steps:

First, calculate the current net operating income

Sales = ( 80*2500 ) = $200000

Variable expenses = (44 * 2500) = $110000

Contribution margin = 90000

Fixed expenses = 76000

Net operating income ( 90000 - 76000 ) = 14,000

Now, calculate the proposed net operating income

Sales = ( 200000 + 14400 ) = $214400

Variable expenses = ( 214400 * 55% ) = $117920

Contribution margin = 96480

Fixed expenses = ( 76000 + 8100) = 84100

Net operating income ( 96480 - 84100 ) = 12380

Therefore net operating income decreased by ( 14000 - 12380 ) = $(1620)

Net operating income measures an income-producing asset's profitability before including any prices from financing or tax. To calculate Net operating income, subtract all running prices incurred on a property from all sales generated at the belongings.

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