Commissions

4.
1
Commissions
A commission is a payment used mainly for salespeople. Many
companies have employees who are paid either totally, or partially
commission basis. People who sell insurance, real estate, and
automobiles typically are in this category. The commission paid is
usually calculated as a percentage of the value of goods sold.
Those whose entire pay is through commission are said to work on
straight commission. Those who receive a base salary plus a commission
are said to work on a salary-plus-commission basis.
Steps to Compute Commission and Total Pay
Step 1. Multiply the commission rate by the amount sold to get the
amount of commission.
Commission = Amount Sold x Rate of Commission
Step 2. If there is a salary, add it to the amount to get the total gross pay.
Total Gross Pay = Salary + Commission

Example 4.1.1
A salesman sells a used car for ₱95,000. His commission rate is 4%.
What will be his commission for the sale?
Solution:
We are only asked to find the commission for the sale.
=₱95,000×0.04
= ₱3,800
The salesman's commission is ₱3,800.
Example 4.1.2
Maria, a computer salesperson is paid a retainer's fee of ₱5,350 per
week, plus a commission of 8% of the profits made by the company on
computers that she sells. How much does she earn in a week if ₱15,000
profit was generated by her sales?
Solution:
First, we compute her commission.
= ₱15000 * 0.08
= ₱1 ,200
Next, we compute for her total gross pay.

= ₱5,350+₱1,200
= ₱6 ,550
Alternatively, we can directly compute the total gross pay as follows.
= ₱5 ,350 + ₱1,500*0.08
= ₱5 ,350 + ₱1,200
= ₱6 ,550
Example 4.1.3
Ana receives 25% commission on the appliances she sells. If she sells
TV for ₱11,170, a refrigerator for ₱6,545 and an airconditioning unit for
₱14,890, how much does Ana make in commission?
Solution:
First, we add the amount of sales Anna made.
Total Amount of Sales = ₱11,170 + ₱6,545 + ₱14,890 = ₱32,605
We now compute the commission she made.

Commission = ₱32,605 × 0.25 = ₱8,151.25
Anna made ₱8,151.25 in commission.
Example 4.1.4
A clerk sold ₱3,500 in merchandise during 1 week. If he received a
commission of ₱140, what was the rate of commission?
Solution:
By substitution, we have
Commission = Amount Sold × Rate of Commission
₱140 = ₱3,500 × Rate of Commission
Rate of Commission = ₱140 ₱3,500
= 0.04
The rate of commission is 4%.
Example 4.1.5
A saleswoman has a commission rate of 3.5%. To earn ₱2,800, how
much must she sell?
Solution:
By substitution, we have
Commission = Amount Sold xRate of Commission
₱2,800 = Amount Sold × 0.035
Amount Sold =
= ₱80,000
She must sell ₱80,000.
Some employers will pay a commission on any sale an employee makes
above a certain level, or quota. Often, these employees will earn a salary
of hourly rate in addition to the commission. To calculate the
commission, subtract the quota from the sales and multiply by the rate of
commission. The gross pay is the salary or hourly pay plus the
commission.
Steps to Compute Commission Based on Quota and Total Pay
Step 1. Subtract the quota from the amount sold and multiply by the
commission rate to get the commission amount.
Commission = (Amount Sold - Quota) x Rate of Commission
Step 2. If there is a salary, add it to the commission amount to get the

total gross pay.
Example 4.1.6
Juan works as a salesman in an electronics shop. He earns a weekly

salary of ₱4,250 plus a 3% commission on sales over ₱20,000 per week.
If Juan's sales in one week reaches ₱35,000, what are his gross pay for
the week?
Solution:
Subtract ₱20,000 from ₱35,000 to find the amount of sales on which he earns
commission. Multiply by the decimal form of the commission rate.
Commission = (Amount Sold - Quota) x Rate of Commission
= (₱35,000 - ₱20,000)×0.03
= ₱450
Now, we add the commission to the weekly salary.

= ₱4,250+450
= ₱4,700
Companies may provide additional incentives by using graduated commission
rates. An employee who is paid a graduated commission is paid an increasing rate
of commission as the amount of sales increases.
Steps to Compute Commission Under a Graduated Rate Plan
Step 1. Calculate each level's commission; multiply each level's sales by the
level's commission rate.
Step 2. Add the products computed in Step 1 to

determine the total commission.
Example 4.1.7
Sonia works as a salesperson. She earns 5% commission on the first

10,000 of sales, and 8% on any sale above ₱10,000 for the week. How
much did Sonia earn in commission in a week if her sales reaches
₱25,000?
Solution:
First, we calculate the commission for the sales up to 10,000.
Commission 1 = ₱10,000 × 0.05 = ₱500
Next, we calculate the commission for the sales over $10,000.

Commission 2 = (₱25,000 - ₱10,000) × 0.08 = ₱1,200
We now add the two commissions to find the total

commission.
Total Commission = ₱500 + ₱1,200 = ₱1,700
Sonia earned ₱1,700 commission in a week.

Example 4.1.8
A real estate agency receives 2% commission on the first ₱1,000,000 of
a sale and 3% on the remainder. How much commission on the sale of a
₱2,800,000 property?
Solution:
The commission may be computed as follows.
Total Commission = ₱1,000,000 × 0.02 + (₱2,800,000 - ₱1,000,000) × 0.03
= ₱20,000 + ₱54,000
= ₱74,000
The commission received on the sale amounts to ₱74,000.

Example 4.1.9
Anna has a monthly commission plan under which she receives 2% on

the first ₱40,000 of sales during the month, 3% on sales from ₱40,000 to
₱80,000, and 4% on all sales over ₱80,000. If Anna has sales of
₱126,000 during a month, compute her commission for that month.
Solution:
We have the following computations.

Commission 1 = ₱40,000 × 0.02 = ₱800
Commission 2 = (₱80,000 - ₱40,000) × 0.03 = ₱1,200
Commission 3 = (₱126,000 - ₱80,000) × 0.04 = ₱1,840
Total Commission = ₱800 + ₱1,200 + ₱1,840 = ₱3,840
Anna's commission for the month is ₱3,840.

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4.

Total Gross Pay = Salary + Commission

Next, we compute for her total gross pay.

We now compute the commission she made.

Step 2. If there is a salary, add it to the commission amount to get the

Juan works as a salesman in an electronics shop. He earns a weekly

Now, we add the commission to the weekly salary.

Steps to Compute Commission Under a Graduated Rate Plan

Step 2. Add the products computed in Step 1 to

Sonia works as a salesperson. She earns 5% commission on the first

Next, we calculate the commission for the sales over $10,000.

We now add the two commissions to find the total

Sonia earned ₱1,700 commission in a week.

The commission received on the sale amounts to ₱74,000.

Anna has a monthly commission plan under which she receives 2% on

We have the following computations.

Anna's commission for the month is ₱3,840.

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