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What Is Commission In Business Math

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What Are The Three Different Types Of Commission

COMMISSION | Business Mathematics


  • COMMISSIONS. Straight | Graduated | Piecework | End of Page.
  • Straight Commission. Straight Commission is calculated to be the persons wage based solely on sales.
  • Graduated Commission. Graduated Commission is calculated into a persons pay in addition to his/her regular salary or wage.
  • Piecework Commission.

Learn About Calculating Commission With The Following Examples And Interactive Exercises

Example 1: The Stettnisch family’s house was sold for $300,000. How much money will they have after they pay their real estate agent a 5% commission?

Analysis: Commission is paid to an employee or company as an incentive to sell more. A commission is generally a of sales. The real estate agent was hired by the Stettnisch family to sell their house for a 5% sales commission.

Solution: * = $15,000 and $300,000 – $15,000 = $285,000

Answer: The Stettnisch family will have $285,000.00 after they pay their real estate agent.

A commission may be paid in addition to a salary or in lieu of a salary. However, in this lesson we will compute only. Let’s look at some more examples of straight commission.

Example 2: A stock broker receives a commission of 11% for selling annuities to her clients. If she sells $50,000 in annuities, how much commission will she earn?

Solution: * = $5,500

Answer: The stock broker will earn $5,500.00.

Example 3: The Jones family purchases $350,000 in life insurance from an insurance broker. How much will they pay the insurance broker if she charges a 0.5% commission?

Solution: * = $1,750.

Answer: The Jones family will pay their insurance broker a commission of $1,750.00.

Example 4: A car salesman earns a 3% commission on sales. If he sells a car for $27,990, how much commission will he earn?

Solution: * = $839.70

Answer: The car salesman will earn a commission of $839.70.

The Following Are Some Reminders In Using This Module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the module. Use a separate sheet of paper in answering the exercises. 2. Dont forget to answer What I Know before moving on to the other activities included in the module.

What I Need to Know

This module is made to help you know the different types of commissions andhow you are going to compute for those commissions in a cash and installment basis.

Our goal in this module is to assist you so that you can analyze wordproblems, compute problems involving commissions and apply it in a real-lifescenario. Together, we will make a detailed study and practice lots of activities.

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Understanding Your Commission Plan

  • 1Find out what your commission is based on. Typically, commissions are paid based on the purchase price of goods and services that you sold. However, some companies use different commission bases, like the items net profit or the items cost to the company.XResearch source
  • Ask if there are any products or services excluded from the commission plan. A company may pay you a commission for selling certain products and services but not others.
  • 2Determine the commission rate that your company pays. The commission payment rate could be, for example, 5% of the selling price of all goods sold. Alternatively, your company might offer a flat commission rate .XResearch source
  • The company may set different commission rates for different types of products. For example, it may pay 6% commission on a product thats hard to sell and only 4% commission on a product thats easy to sell.
  • 3Learn about any other nuances in your commission plan. For example, in some plans, your commission rate changes after you sell a certain amount of product or if you reach a specific quarterly goal. This is called an override.XResearch source
  • In a tier-based commission system, for example, your commission rate might increase to 7% after you sell $50,000 worth of product.
  • Some commission plans may involve splitting the commission if you make a sale or complete a project jointly with another employee.
  • Solve Sales Tax Applications

    Commission earnings form Q sales.

    Sales tax and commissions are applications of percent in our everyday lives. To solve these applications, we will follow the same strategy we used in the section on decimal operations. We show it again here for easy reference.

    HOW TO: Solve an application
    • Step 1. Identify what you are asked to find and choose a variable to represent it.
    • Step 2. Write a sentence that gives the information to find it.
    • Step 3. Translate the sentence into an equation.
    • Step 4. Solve the equation using good algebra techniques.
    • Step 5. Check the answer in the problem and make sure it makes sense.
    • Step 6. Write a complete sentence that answers the question.

    Remember that whatever the application, once we write the sentence with the given information , we can translate it to a percent equation and then solve it.

    Do you pay a tax when you shop in your city or state? In many parts of the United States, sales tax is added to the purchase price of an item. See Figure \. The sales tax is determined by computing a percent of the purchase price.

    To find the sales tax multiply the purchase price by the sales tax rate. Remember to convert the sales tax rate from a percent to a decimal number. Once the sales tax is calculated, it is added to the purchase price. The result is the total costthis is what the customer pays.

    Figure \ – The sales tax is calculated as a percent of the purchase price.

    Definition: sales tax

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    What Is The Difference Between Profit And Commission

    Some employees also earn a commission which we learned the company calculates as a percentage of total sales that the employee makes. And finally we learned that the difference between revenue and expenses is called profit and it helps a business determine if its products and services are priced properly.

    How To Calculate Commission

    This article was co-authored by Michael R. Lewis. Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. He has over 40 years of experience in business and finance, including as a Vice President for Blue Cross Blue Shield of Texas. He has a BBA in Industrial Management from the University of Texas at Austin. This article has been viewed 538,725 times.

    While many employees are paid on an hourly or salaried basis, commissioned employees are paid based on the value of goods and services that they sell. Commission-based payment is common in certain positionssales in particularwhere bringing in money is an important part of the job. To calculate commission, you need to understand what system your business uses and any additional factors that may affect your total commission earnings.

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    Business Mathematics Problems And Solutions

    Question 1: A music system was bought for Rs.10,500 and sold at Rs.9,500. Find the amount of profit or loss.

    Solution: Given,

    Cost Price of the music system = Rs.10,500

    Selling Price of the music system = Rs. 9,500

    We can see here, C.P. is greater than S.P. Therefore, there is a loss in this business.

    Hence, we need to calculate the loss amount.

    Loss = C.P. S.P.

    Loss = 10,500 9,500 = Rs.1,000/-.

    Question 2: A pair of shoes is bought at Rs 200 and sold at a profit of 10%. Find the selling price of the shoes.

    Solution: Given,

    P = × 200 = Rs. 20

    S.P. = C.P. + Profit

    S.P. = 200 + 20 = Rs.220/-

    Question 3: If the cost price of an article including 20% for taxes is Rs. 186, then find the original cost of the article excluding taxes.


    Let x be the original price of an article.

    Tax = 20% of x = × x = 0.2x

    According to the given statement,

    Original cost + tax = New cost price

    x + 0.2x = Rs. 186

    Making Adjustments As Necessary

    Mathematics: How to Calculate Commission (examples)
  • 1Take split commissions into account. Split commissions are when more than one salesperson is involved in a sale and they share the commission. Alternatively, a regional sales manager may receive part of the commission of the salespeople in their region.XResearch source

    Did you know? Split commissions are common in real estate transactions. Real estate brokers frequently split their commissions with 1 or more agents involved in the sale of a property.XResearch source

  • 2Assess any additional bonus structures or related incentives. In addition to a straight percentage, a commission structure also can include any number of more complicated incentives for a salesperson or other commission-earning individual.
  • For example, if you know that your commissions were the top-scoring numbers for a department or team, you may be eligible for top-performance bonuses.
  • 3Be prepared to lose commissions based on returns. Depending on your commission plan, your company may subtract money from your commission if merchandise or services you sold are returned or refunded. You may also lose commission money if payment for your services cant be collected for some other reason .XResearch source
  • For example, if you sold $30,000 worth of merchandise during your commission period, but customers return $600 worth of that merchandise, $600 may be subtracted from your commission base.
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    What Is Meant By Straight Commission Plan

    What is Straight Commission Plan? This is a form of salesforce compensation. In this no fixed salary is paid to the employee. Instead the salesperson is paid a percentage of the total sales he/she has achieved. It is a measure of his/her performance rather than the number of hours put in at the job.

    Illustrate Different Types Of Commissions

    Whats New

    Ms. Katrina Perez is a sales agent at Toyota Bataan Branch. The companyoffers her a commission of 3.5% in every car that she will sell. Last June, the BataanBranch celebrated their 5th year and added 2% commission on all its employeesincluding Ms. Perez. Luckily, she sold an Innova car that costs Php1,538,000 on thatmonth. The company also ensures that the employees have their monthly salary ofPhp12,000 with or without a sale.

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    Harry Gets A Gross Pay Of 51128

    c. Graduated Commission calculated into a person’s pay in addition to his/her regular salary or wage.

    Example: Steve works for a company that pays him 500 per month and 1% on the first 5,000 sold, 2% on thenext 15,000 sold and 3% on all sales over 20,000. What is his gross pay if he sells 25,000?

    What Does Full Time Commission Mean

    MLM math: 35k in sales, 1k in commissions : antiMLM

    What does it mean to be paid by commission? A commission is a payment that an employee makes based on a sale. When an employee earns a commission they make a portion of the sale in income. For example if an employee sells a couch for $500 and they get a 10% commission on all sales then they earn $50 on that sale.

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    Mathematics For The Liberal Arts Corequisite

    • Calculate sales commission given total purchase price and rate
    • Calculate rate of commission given purchase price and commission earned

    Sales people often receive a commission, or percent of total sales, for their sales. Their income may be just the commission they earn, or it may be their commission added to their hourly wages or salary. The commission they earn is calculated as a certain percent of the price of each item they sell. That percent is called the rate of commission.

    Commission / Gross Proceeds And Net Proceeds

  • 1. Commission / GrossProceeds and Net Proceeds© Prof. Vincent Sangalang. All Rights Reserved.May not be scanned, copied or duplicated, orposted to a publicly accessible website, in wholeor in part.
  • 2. Commission Commission or brokerage is the amount of moneypaid to an agent for performing a business servicesuch as buying and selling goods, property orcollection of money. Problems involving commission are percentageproblems. Commission is the percentage in the salescollections which is called the base.
  • 3. Formulas: Commission = Sales x Rate of Commission Rate of Commission = Commission/Sales Sales or Selling Price = Commission/Rate ofCommissionor C = Sales x R of C R of C = C/Sales Sales = C/R of C
  • 4. Finding Commission Art Caras, a licensed real estate broker, sold a houseand lot for P5,500,000 and was given a commissionof 5%. How much did he earn? Solution:Commission = Sales x R of C= P5,500,000 x .05= P 275,000
  • 5. Finding the Rate of Commission Karen receives a monthly salary of P15,000 plus commission onall sales. Last month, her total earnings, salary plus commissionwere P27,000. If her total sales for the month were P240,000,what is the rate of her commission? Solution:C = Salary plus commission last month – Salary= P27,000 P15,000= P12,000R of C = P12,000/P240,000= .05 or 5%
  • 6. Finding Sales Ada Madel earned P27,500 commission at a rate of5% for selling a farm. What was the selling price ofthe farm? Solution:Sales = C/R of C= P27,500/.05= P550,000
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    More Solved Examples For You

    Q1. After allowing a discount of 12% on the marked price of an article, it is sold for Rs 880. Find the market price.

    Answer: We have, $$S.P.=Rs880\\ Discount\_ rate=12 \%$$ . Therefore, $$M.P.\quad =\frac \\ M.P.\quad =\frac Rs.\\ M.P.\quad =\frac Rs.\\ M.P.\quad =1000Rs.$$

    Q2. A shopkeeper offers his customers 10% discount and still makes a profit of 26%. What is the actual cost to him of an article marked Rs 280.

    Answer: Shopkeeper makes proa fit of 26% on selling price item. First, we will determine the selling price of the item.

    Calculation of selling price

    We know: $$M.P.=Rs280\\ Discount\_ Rate=10%$$ . Therefore, $$S.P.\quad =\quad M.P.\left \\ S.P.\quad =\quad 280\left Rs.\\ S.P.\quad =\quad 280\left Rs.\\ S.P.\quad =\quad 252Rs.$$

    Calculation of cost price

    Now we that $$S.P.\quad =\quad 252Rs.\\ Gain=26 \%$$ , Therefore, $$C.P.\quad =\quad S.P.\left \\ C.P.\quad =\quad 252\left Rs.\\ C.P.\quad =\quad 252\left Rs.\\ C.P.\quad =\quad 200Rs.$$

    Hence, the actual cost of the article is Rs 200

    Question. What is the way of calculating a discount?

    Answer. In order to calculate a discount, one must multiply the original price by the decimal form of the percentage. In order to calculate the items sale price, subtract the discount from the original price. One can do this by using a calculator or manual estimation.

    Question. How can one take 20% off a price?

    Question. Explain what is a discount with example?

    Question. Explain how one can calculate a 10% discount?

    What Is Business Mathematics

    Commission Math Example

    Business Math always deals with profit or loss. The cost of a product is fixed by taking into consideration its profit, margin, cash discount, trade discount, etc. Business mathematics is used by commercial companies to record and manage business works. Commercial businesses use maths in departments of accounting, inventory management, marketing, sales forecasting and financial analysis.

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    Example Of A Commission Calculation

    The commission plan of Mr. Smith is to earn 4% of all sales, less any returned merchandise. If he reaches $60,000 in sales by the end of the quarter, the commission retroactively changes to 5%. In the first quarter, he has $61,500 of sales, less $500 of returned merchandise. Thus, the calculation of his commission for the entire quarter is:

    $61,000 Net sales x 5% Commission rate = $3,050

    This Module Was Collaboratively Designed Developed And Reviewed By

    This learning resource hopes to engage the learners into guided andindependent learning activities at their own pace and time. Furthermore, this alsoaims to help learners acquire the needed 21st century skills while taking intoconsideration their needs and circumstances.

    In addition to the material in the main text, you will also see this box in thebody of the module:

    As a facilitator you are expected to orient the learners on how to use thismodule. You also need to keep track of the learners’ progress while allowing them tomanage their own learning. Furthermore, you are expected to encourage and assistthe learners as they do the tasks included in the module.

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    Presentation On Theme: Business Math 14 Commissions Presentation Transcript:

    1 Business Math1.4 Commissions

    2 Goals Calculate straight commission earningsCalculate commission earnings based on quotaCalculate graduated commission earningFind the rate of commission

    3 Start UpTwo sales jobs are advertised in the newspaper. The first job pays a commission of 3.5% on all sales, and sales usually average $52,000. The second job pays a commission of 4% on sales up to $5,000 and 12% on sales over $5000, and the sales usually average $25,000 a month. Based on the usual monthly sales average, which job pays more?Do Math Builder page 20

    4 Straight CommissionCommission may be an amount for each item sold, or a percentage of the dollar value of sales.Straight commission – when the earning for a person come only from the amount they sell.Quantity sold * Rate of commission = commission

    5 Commission based on quotaQuota the fixed amount a sales person must sell before they can start earning commission*commission rate = commission

    6 Graduated CommissionGraduated Commission the rate of commission increases as sales increase

    7 Rate of commission on salesTo find the rate of commission take the amount of commission paid / salesWrap up Page 23In a Group discuss communication page 23

    Total Sales Commission Rate Amount Of Commission


    B. Solve the following problems and show your solution : 1. A stock broker receives a commission of 11% for selling annuities to her clients. If she sells 60,000in annuities, how much commission will she earn?

    2. Patrick works at the Brick, and is paid based on his weekly sales. Last week he sold a couch for 800,and a chair for 560, and two stoves at 2200 each. If Patrick earns 12.6% commission on all items sold, howmuch did he make last week?

    3. Barb, the assistant manager of a clothing store, earns a salary or 360 per month. She also receives a5% commission on the first $9000.00 she sells, and 6% on sales over 9,000. If Barb sold 17,800 worth ofclothes last month, what was her total pay?

    4. A car salesman earns a 5% commission on sales. If he sells a car for 29,990, how much commissionwill he earn?

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