When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by?

1 answer:

4 0

When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by -more than 15% b/c fixed costs do not increase with changes in activity.

<h3>What is Net operating income?</h3>

Net income in business and accounting is an entity's revenue less costs, depreciation and amortization, interest, and taxes for a certain accounting period..

Net Operating Income, or NOI for short, exists a formula those in real estate use to quickly calculate the profitability of a particular investment. After deducting essential operational costs, NOI calculates the revenue and profitability of investment real estate property.

By deducting all annual expenses from income, the NOI formula determines how profitable a potential investment property is over the course of a single year.

After all costs have been deducted, operating profit displays a company's earnings, excluding the cost of debt, taxes, and some one-time expenses.

Net income, on the other hand, represents the profit remaining after all costs incurred in the period have been subtracted from revenue generated from sales.

Hence, When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by -more than 15% b/c fixed costs do not increase with changes in activity.

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