Types of Commission

ILLUSTRATE TYPES OF COMMISSIONS ANDCOMPUTE COMMISSIONS ON CASH ANDINSTALLMENT
BASIS
Commission
is a payment based on the percentage of sales of an agent.
Commission
will help the employer and employees to have a harmonious relationship within the company. This will

serve as a reward for the employees who will make a sale. It can also be a driving force for the
employees to do their job efficiently and effectively.
Formula for the Commission
Commission Rate x Total Amount Sale of the Month
Formula for the Gross Pay for the Month
Commission + Basic Salary

Steps in Computing for the Commission
1.Analyze the problem carefully.
2.Jot down all the given.
3.Write the indicated formula.
4.Substitute the given to the formula.
5.Perform the operations needed.

Different Types of Commissions
1.Straight Commission
2.Graduated Commission
3.Salary Plus Commission

11

A Straight Commission
is a form of compensation but with no fixed salary of the agent? It means that it is only the commission
of sales that the agent will get from the company.
EXAMPLE 1 (Straight Commission):
Nathaniel works in a company with a commission only basis. His boss gave him a 3.2% commission on
his total monthlysales without a base salary. Fortunately, Nathaniel made a sale of Php180,000 forthe
month of July. How much will be his commission?
Solution:
Commission Rate = 3.2%
→ 0.032 (always make this a decimal point)
Total Sale = Php180,000
Formula:
= 0.032 x 180,000
=Php5,760(the commission that Nathaniel will get for July)
EXAMPLE 2 (Straight Commission):
Salve started a company with a commission only basis of 2.8%. One of her employees made a sale of
Php132,000worth of furniture last March. Unfortunately, the costumer who bought a dining table set
worth Php28,300 returned it because of some defects. How much commission will Salve give to her
employee who made that sale?
Note:
Returned items must be deducted to the total amount of sale beforecomputing for the commission
Solution:
Commission Rate = 2.8% → 0.028 (always make this a decimal point)
Total Sales = Php132,000
– Php28,300 (returned item) = Php103,700

Formula:
= 0.028 x 103,700
= Php2,903.60 (the commission that Salve will give to her employee)
A Graduated Commission
is a type of commission that the company gives totheir sales agent not in once but in gradual. The
commission will increase if the sale of an agent also increases. This will encourage the agent to sell more
so that they can earn a big commission.
EXAMPLE 3 (Graduated Commission):
Rolando is an agent with a commission of 3% on his first Php150,000 of sales during the month and
2.5%commission on sales above Php150,000. He happened to have a sale of Php187,000.How much will
he earn?

Solution:
1st
Commission Rate = 3%
1st
Sale = Php150,000
2nd
Commission Rate =2.5% → 0.025 (always make this a decimal point)
2nd
Sale = Php187,000
– Php150,000 = Php37,000
Formula:
Commission Rate x Sale of the Month
We first need to compute for the first commission that he can get fromPhp150,000.
= 0.03 x 150,000
= Php 4,500 (Rolando’s first commission)

Then compute for the commission of the remaining sale.
= 0.025 x 37,000
= Php 925 (Rolando’s commission from the remaining sale)
Add the 1st and 2nd
commission to get the final commission for month.
= Php 4,500 + Php 925
= Php 5,425 (Rolando’s total commission)
EXAMPLE 4 (Graduated Commission):
Loretta has a monthly commission of2.6% on all her total sales. The company gives her 1% commission
bonus if she reached a minimum of Php35,000, another 1% if she also exceeds the minimum
ofPhp75,000. How much will be her total earnings if she happened to reach sales ofPhp98,000?
Solution:
She automatically has 2.6% from all her sales so ,Php 98,000 x 0.026 = Php2,548
Then, compute for her first bonus
Php98,000
– Php35,000 = Php63,000 x 0.01 = Php630
Then another 1% commission for her last bonus which is,Php98,000
– Php75,000 = Php23,000 x 0.01 = Php230
To compute for total earnings, just add all the commission she will getPhp2,548 + Php630 + Php230
=Php3,408
A Salary Plus Commission
is when an agent gets a salary on top of the commission he/she will get for every sale that he/she can
make.
EXAMPLE 5 (Salary Plus Commission):
Mr. Chan is working in a company with a minimum salary wage of Php12,000 monthly. On top of his
salary, he is expected to sell appliances worth Php6,000. He can get an additional 3% commission
when he exceeds his expected sales. He fortunately made a sale worth Php13,700.How much will be his
gross pay?

Solution:
To computer for his commission,
Php13,700
– Php6,000 = Php7,700 x 0.03 = Php231
Then compute now the gross pay, Commission + Monthly SalaryPhp231 + Php12,000 = Php12,231
A Commission on Installment Basis
is a commission not based on sales, but it is a commission based on the collection or what we call
payments by buyers.
Installment means that the buyers didn’t pay all at once.
EXAMPLE 6 (Commission on Installment Basis):
Mr. Watson works in a cellphone shop that offers him 3% commission on every sale he can make. He
made a sale worth Php80,000 that can be paid in an installment of Php10,000 per month for 8 months.
How much will be his monthly commission? How much is the total commission he can get?
Solution:
Commission Rate = 3%
Monthly Payment = Php 10,000
Formula:
Commission Rate x Payment
= 0.03 x Php10,000
= Php300 is his monthly commission.
= Php300 x 8 months
= Php2,100 is his total commission

Types of Commission

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ILLUSTRATE TYPES OF COMMISSIONS ANDCOMPUTE COMMISSIONS ON CASH ANDINSTALLMENT

is a payment based on the percentage of sales of an agent.

will help the employer and employees to have a harmonious relationship within the company. This will

EXAMPLE 1 (Straight Commission):

Commission Rate = 3.2%

→ 0.032 (always make this a decimal point)

Total Sale = Php180,000

Commission Rate x Total Amount Sale of the Month

=Php5,760(the commission that Nathaniel will get for July)

EXAMPLE 2 (Straight Commission):

Commission Rate = 2.8% → 0.028 (always make this a decimal point)

Total Sales = Php132,000

– Php28,300 (returned item) = Php103,700

Commission Rate x Total Amount Sale of the Month

= Php2,903.60 (the commission that Salve will give to her employee)

EXAMPLE 3 (Graduated Commission):

→ 0.03 (always make this a decimal point)

Commission Rate =2.5% → 0.025 (always make this a decimal point)

Commission Rate x Sale of the Month

= Php 4,500 (Rolando’s first commission)

Then compute for the commission of the remaining sale.

= Php 925 (Rolando’s commission from the remaining sale)

Add the 1st and 2nd

commission to get the final commission for month.

= Php 4,500 + Php 925

= Php 5,425 (Rolando’s total commission)

EXAMPLE 4 (Graduated Commission):

Then, compute for her first bonus

– Php35,000 = Php63,000 x 0.01 = Php630

Then another 1% commission for her last bonus which is,Php98,000

– Php75,000 = Php23,000 x 0.01 = Php230

A Salary Plus Commission

EXAMPLE 5 (Salary Plus Commission):

– Php6,000 = Php7,700 x 0.03 = Php231

A Commission on Installment Basis

Installment means that the buyers didn’t pay all at once.

EXAMPLE 6 (Commission on Installment Basis):

→ 0.03 (always make this a decimal point)

Monthly Payment = Php 10,000

= Php300 is his monthly commission.

= Php2,100 is his total commission

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