Commision BMAT

Business Math
Commissions
Erick resigned from his job out of boredom and took a new job as a sales representative. Believing that he will enjoy
more in this new job, he didn’t really mind what he will get. The following are the options he was offered:
1. His pay would be through straight commission basis.
2. He gets a fixed base salary plus a commission.
3. He gets paid through graduated commission.
4. He gets paid on commission by installment basis.
If you were Erick, which mode of compensation would you take?
A commission is a fee that a business pays to a salesperson (agent) in exchange for his services in either facilitating,
supervising, or completing a sale. The commission may be based on a flat arrangement or as a percentage of the
revenue generated by a salesperson. In other words, commission (remuneration) is a form of payment to an agent for
services rendered.
Three different types of commission:

1. Straight Commission, also called (revenue commission) – a commission based on a percentage of sales only. (This is
very profitable if you are selling high-ticket items.)
Example 1: Mike receives 20% commission on the appliances he sells. If he sell a TV for PhP7,000, a refrigerator for
PhP12,000, and a heater for PhP 1500, how much does Mike make in commission?
2. Salary plus Commission – a commission in which a salesperson gets his basic salary and a percentage of whatever
sales he makes.
Example 2: Mike decides to work for another company that will pay him PhP2,000 per week and 10% commission on
sales above PhP20,000 for the week. If he sold goods worth PhP26,000, what is his gross pay (salary plus commission)?
3. Graduated Commission – a commission, which varies according to how much sales, is made.
Example 3: Mike works for a company that pays him 2% on the first PhP 20,000 sold, 3% on the next PhP 30,000 sold and
5% on all sales beyond PhP50,000. What is his gross pay if he sells PhP 60,000?
Computing Commissions on Cash Basis

This type of commission is similar to computing straight commissions.
Example 1: Mike works at ABC Gadget Store. For every cash purchase of a cell phone, he gets 6.1%commission. In a
particular month, he was able to sell 10 cellphones costing PhP18,000 each. How much was his total commission for
such cash sales?
Commission on Installment Basis

Example 2: At ABC Gadget Store, some items are paid on installment basis through credit cards. Mike was able to sell 10
cellphones costing PhP18,000 each. Each transaction is payable in 6 months equally divided into 6 equal installments
without interest. Mike gets 2% commission on the first month for each of the 10 cell phones. Commission decreases by
0.30% every month thereafter and computed on the outstanding balance for the month. How much commission does
Mike receive on the first month? On the second month? On the third month? On the fourth month? On the fifth month?
On the sixth month? At the end of installment period, how much will be his total commission?
Definition of Down payment:
Down payment is a first payment that one makes when one buys something with an agreement to pay the rest later.
Obtaining Down Payments

Example 1: When one purchases a car or any big item not through cash but installment terms, normally, a certain down
payment is required of the buyer. Car dealers normally require a minimum down payment, which is usually 20% of the
total cost of the vehicle being purchased. The interest on the remaining balance is then computed depending on the
number of years a buyer would want to amortize the remaining balance. If a car costs PhP1,000,000 and a minimum
20% down payment is required by the company, then the buyer will have an initial cash out of PhP200,000; that is, 20%
(1,000,000) = PhP200,000. The remaining PhP800,000 will be amortized monthly and the amount of monthly
amortization depends on the number of years the buyer will want to pay the loan. Normally, buyers prefer a 3-year or
5-year payment period. The lesser the number of years, the lesser the total amount of money paid as interest to the
loan. But with this arrangement, the monthly amortization will be considerably higher than when one chooses to pay
the balance for longer number of years.
Example 2: Companies selling houses or condo units lure buyers by stating that no down payment is required but only a
certain amount of reservation fee is required. The reservation fee paid is deductible when the buyer decides to proceed
with the purchase. Otherwise, it will be forfeited in favor of the company. After the reservation fee has been paid, the
buyer is told to pay the monthly amortization. For instance,
P10,000 per month for two years without interest. At the end of two years, the remaining balance will now be subjected
to an interest either through in-house or bank financing.
Example 3: Other companies selling houses or condo units also have schemes like requiring the buyer to pay a certain
cash amount after one year aside from the monthly amortization. The cash amount increases for the next year up to the
third year. At the end of the third year, all cash amounts and monthly amortizations paid by the buyer are deducted
from the purchase price of the unit being bought. The remaining amount will be the one subjected to an interest either
through in-house or bank financing.
Definition of book balance or gross balance:

This refers to the total amount of money a bank has on deposit before adjusting for uncleared checks or deposits, as
well as reserve requirements. That is, the book balance is a measure of what the bank has on hand before adding or
subtracting regulatory obligations and items that will soon appear on its books. This is the term used by banks to
describe the amount of money available before any adjustment is made for deposits in transit, checks that have not
been cleared, and reserve requirements and interest received from “float funds”.
Example 1: A simple case of gross balance refers to what is readily available for you to use based on your bank deposits.
For example, a check amounting toPhP5,000 that has been deposited today may not be withdrawn the next day because
it has not cleared yet. If your bank passbook currently contains PhP30,000, you may not be able to withdraw the whole
amount yet because your gross balance is only PhP25,000 since your check has not been cleared yet.
Definition of current increased balance:

This may refer to the total amount you have to pay that includes penalties or interest incurred by unpaid balance from a
loan or payment you are supposed to have made but was not able to do so on time.
Example 2: Refer to Example 9 of the instructional guide for Problems involving Fractions, Decimals, and Percent.
The following is Example 9 reproduced below:
As of this month’s cut-off date, the current total amount due from your purchases using your credit card is PhP
99,386.59. The minimum required payment is 5% of the total amount due. If you pay only the minimum required
payment, a financing charge of 3.4% of the remaining
balance will be charged to the next bill. Assuming you refrain from using your credit card on any of your purchases for
the next 3 months and the financing charge of 3.4% is charged every billing period, show your expected monthly bill for
the next 3 months.
Solution: Given the current bill of PhP 99,386.59, the minimum required payment is 0.05(99,386.59) = PhP4,969.33. If
only the minimum required payment is paid, then the remaining debt balance is 99,386.59 - 4,969.33 = PhP94, 417.26.
Assuming there are no credit bill transactions for the next 3 months and only the minimum required payment each
month is paid, the table below shows the monthly total amount due for each of the next 3 months.
Observe that for the next 3 months, a total of PhP14,386.44 has already been paid for the credit card bills. However,
only PhP5,184.56 (99,386.59 - 94,202.03) has been deducted so far from the original debt of PhP99,386.59. Hence, every
time we keep paying only the required minimum payment, more money goes to interest payments rather than payment
of the actual debt.
From the above example, your minimum required payment of PhP4,969.33 serves as your down payment for your loan
of PhP99,386.59 leaving you with a balance of PhP94,417.26 at the start of the month. However, because there is a
finance charge of 3.4%, if you are not able pay for the next month, your current increased balance will become
PhP97,627.45.
CHECKING FOR UNDERSTANDING
1. Juan makes money by commission rates. He gets 15% of everything he sells. If Juan sold PhP230,000 worth of items
this month, what is his salary for the month?
2. Mark makes PhP12,000 a month plus some money by commission rates. He gets 8% of everything he sells. If Mark
sold PhP60,000 worth of items this month, what is his salary for the month?
3. John receives PhP10,000 as monthly salary. As an agent, his monthly quota is PhP50,000 worth of beauty products
for which he gets 5% commission on all sales beyond his monthly quota. If he sold PhP75,000 worth of beauty
products this month, what is his total salary for this month?
4. A sales agent receives PhP12,000 a month corresponding to a sales of PhP30,000 worth of goods. Furthermore, he
receives an additional 6% commission for all sales beyond his monthly quota but not greater than PhP50,000. An
additional 3% commission is for sales beyond PhP50,000. If his sales is PhP70,000 for the month, how much is his
salary for the month?
5. A tutor at ABC Learning Center receives a monthly base pay of PhP8,000 corresponding to a PhP5,000 tutorial fee
input to the Center. He gets a share of 15% of all tutorial fees beyond the mandatory PhP15,000 input. If each
student he handles pays PhP6,000/month on tutorial fees and he has five students for the month, how much share
does he receive beyond his base pay?
6. A salesperson gets a commission for his sales based on the following scale:
6% on all sales
5% on all sales between PhP50,000 and PhP100,000
4% on all sales over PhP100,000
If his total sales was PhP150,000, what is his gross pay?
7. A real-estate agent receives a 3% commission of PhP300,000 for selling a house. What was the price of the house?
8. An appliance center agent sold a set of kitchen utensils for PhP20,000 and got a PhP600 commission. What was the
commission rate?
9. Miguel earns a commission of 10% which is PhP10,000. How much did he sell?
10. Carlo sold his house for PhP8,000,000. The real-estate agent got a 5% commission from the sales. From his
commission, he has to pay BIR tax and other obligations required for the transfer of ownership of the property to
the buyer. This expense represents 6% of his total commission. How much net amount will he receive?

Commision BMAT

Uploaded by

Copyright:

Available Formats

Commision BMAT

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Commision BMAT

Uploaded by

Copyright:

Available Formats

Business Math

Three different types of commission:

Computing Commissions on Cash Basis

Commission on Installment Basis

Obtaining Down Payments

Deﬁnition of book balance or gross balance:

Deﬁnition of current increased balance:

The following is Example 9 reproduced below:

CHECKING FOR UNDERSTANDING

If his total sales was PhP150,000, what is his gross pay?

You might also like