Commission Calculation PDF

COMMISSI ON By: Mary Jane V. Macasiano  Objectiv Illustratee: the different types of commissions Compute commissions on cash basis and commission on installment basis. Solve problems involving commissions.  COMMISSIO a fee that N...

COMMISSI ON By: Mary Jane V. Macasiano  Objectiv Illustratee: the different types of commissions Compute commissions on cash basis and commission on installment basis. Solve problems involving commissions.  COMMISSIO a fee that N 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. 4 TYPES OF COMMISSION Graduate 01 Straight 03 d Commission Commissi on Quota Salary plus 02 04 Commissi Commission on  Straight Commissio 01 n  Straight Commission a form of salesforce compensation. It is a measure of performance, rather than the number of hours put in EXAMPL MikeE: receives 20% commission on the appliances he sells. If he sell a TV for ₱7,000, a refrigerator for ₱12,000, and a heater for ₱1,500, how much does Mike make in commission?  SOLUTIO Total sales:N: = ₱7,000 + ₱12,000 + ₱1,500 = ₱20,500 Commission: = ₱20,500 x 20% = ₱20,500 x 0.20 = ₱4,100 EXAMPL E: A salesman sells a used car for ₱95,000. His commission rate is 4%. What will be his commission for the SOLUTIO N: Commission: = ₱95,000 x 4% = ₱95,000 x 0.04 = ₱3,800  Salary plus Commissio 02 n  Salary plus A commission Commissionin which a salesperson gets his basic salary and a percentage of whatever sales he  EXAMPL E: decides to work for Joshua another company that will pay him ₱2,000 per week and 10% commission on sales above ₱20,000 for the week. If he sold goods worth ₱26,000, what is his gross pay (salary SOLUTIO Amount of goods sold above ₱20,000: N: = ₱26,000 – ₱20,000 = ₱6,000 Commission: = ₱6,000 x 10% = ₱6,000 x 0.10 = ₱600 Gross pay: = ₱2,000 + ₱600 = ₱2,600 EXAMPL E:a computer salesperson Maria, is paid ₱5,350 per week plus a commission of 8% of the profits made by the company on the computer that she sells. How much will she earn in a week if ₱15, 000 profit was generated SOLUTIO Commission: N: = ₱15,000 x 8% = ₱15,000 x 0.08 = ₱1,200 Gross pay: = ₱5,350 + ₱1,200 = ₱6,550  Graduated Commissio 03 n  Graduated commission Commission that has a structure that gradually increases as you sell more. EXAMPL Charles E: works for a company that pays him 2% on the first ₱20,000 sold, 3% on the next ₱30,000 sold and 5% on all sales beyond ₱50,000. What is  SOLUTIO First commission:N: Third commission: = ₱20,000 x 2% = (₱60,000 – = ₱20,000 x 0.02 ₱50,000) x5% = ₱400 = ₱10,000.00 x 0.05 = ₱500 Second commission: = ₱30,000 x 3% Gross pay: = ₱30,000 x 0.03 = ₱400 + ₱900 + = ₱900 ₱500 = ₱1,800 EXAMPL A real E: estate agency receives 2% commission on the first ₱1,000,000 of a sale and 3% on the remainder. How much commission is received on  SOLUTIO LONG METHOD:N: Commission 1: Total Commission: = ₱1,000,000 X 0.02 = ₱20,000 + = ₱20,000 ₱54,000 Commission 2: = ₱74,000 = (₱ 2,800,000 – ₱1,000,000)0.03 = ₱1,800,000 X 0.03 = ₱54,000  SOLUTIO N: SHORT METHOD: Total Commission: =(₱1,000,000 X 0.02) + [(₱ 2,800,000 – ₱1,000,000) X 0.03)] =₱20,000 + (₱1,800,000 X 0.03) = ₱20,000 + ₱54,000 Total Commission = ₱74,000  04 Quota Commission Quota Commission Some employers will pay a commission on any sale an employee makes above a certain level or quota also known as quota- based commission. EXAMPL A saleswoman E: is paid ₱10,500 a month plus 2.75% of her sales above ₱5,000. If she sold ₱26,575 worth of merchandise in a month, what is her  SOLUTIO N: Commission: = (₱26,575 – ₱5,000) x 2.75% = ₱21,575 x 0.0275 = ₱593.31 Gross pay: = ₱10,500 + ₱593.31 = ₱11,093.31  EXAMPLE S: Identify the types of commission in the following situation A pharmaceutical sales representative earns a commission based on their monthly sales:1% for the first $50,000 in sales,3% for sales between $50,001 and $100,000,5% for sales above $100,000. In one month, the rep makes $120,000 in sales. Their commission is calculated as:1% of $50,000 = $500,3% of $50,000 = $1,500,5% of $20,000 = $1,000. Total commission: $500 + $1,500 + $1,000 = $3,000. A retail sales associate for a clothing brand receives a fixed money of $2,500 plus a 3% commission on total sales. If they sell $20,000 worth of merchandise in one month, they earn an additional $600 in commission ($20,000 x 3%), bringing their total monthly earnings to $3,100. A freelance graphic designer works on ABC Company. They do not receive a salary but earn 20% of the contract value for each design project they bring in. One month, they secure a project worth $10,000 and earn $2,000 (20% of $10,000). If they don’t bring in any new projects, they don’t earn anything that month. A salesperson for a tech company must hit a quarterly sales of $150,000 to earn commission. Once they surpass this, they receive a 10% commission on all sales made beyond the target. In Q1, they sell $180,000, so they earn $3,000 in commission (10% of $30,000, which is the amount over the quota). Commissions on Cash Basis Computing Commissions on Cash Basis This type of commission is similar to computing straight commissions.  EXAMPL A furniture store sells a sofa for E: $1,500, and the salesperson earns a 6% commission on each sale. The store operates on a cash basis for commission, meaning the salesperson only gets their commission after the customer has paid the full amount. If the customer pays in full at the time of the sale, the salesperson immediately  EXAMPL E:at ABC Gadget Samuel works 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 ₱18,000 each. How much was his total commission for such cash  SOLUTIO Total sales: N: = ₱18,000/cellphone x 10 cellphones = ₱180,000 Cash commission: = ₱180,000 x 6.1% = ₱180,000 x 0.061 = ₱10,980  EXAMPL E: Linda is a sales representative at a car dealership. She earns a 4% commission on each car she sells. Linda sold a car for $30,000. She sold 2 cars each week. How much was  SOLUTIO Total sales: N: = ₱30,000/car x 4% = ₱1,200 Cash commission: = ₱1,200/per car(2) x 4 weeks = ₱2,400 x 4 weeks = ₱9,600 Commission on Installment Commission on Installment Basis paying commission to a salesperson or agent in stages, aligned with how the customer makes payments for a product or service.  EXAMPL At ABC Gadget Store, some are paid on E: credit cards. Mike was installment basis through able to sell 10 cellphones costing ₱18,000 each. Each transaction is payable 6 months equally divided into 6 equal installments without interest. Mike gets 2% commission on the first month for each of the 10 cellphones. 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 six month? At the end of installment  SOLUTIO N: First month commission: ₱18,000/cellphone x 10 cellphones x 0.02 = ₱3,600 Second month commission: ₱15,000/cellphone x 10 cellphones x (0.02 – 0.003) = ₱2,550  SOLUTIO Third monthN: commission: ₱12,000/cellphone x 10 cellphones x (0.017 – 0.003) = ₱1,680 Fourth month commission: ₱9,000/cellphone x 10 cellphones x 0.014 – 0.003)  SOLUTIO Fifth month N: commission: ₱6,000/cellphone x 10 cellphones x 0.011 – 0.003) = ₱480 Six month commission: ₱3,000/cellphone x 10 cellphones x 0.008 – 0.003) = ₱150  SOLUTIO N: Total commission: ₱3,600 + ₱2,550 + ₱1,680 + ₱990 + ₱480 + ₱150 = ₱9,450  EXAMPL A car dealership sells a car for E: $20,000, with the buyer opting for an installment plan over 24 months. The salesperson's commission is 5% of the total sale price, but instead of receiving the full commission upfront, the salesperson gets a  SOLUTIO Total commissionN: = $20,000 × 5% = $1,000 Installment payment = $20,000 ÷ 24 months = $833.33/month Commission per installment = $1,000 ÷ 24 months = $41.67/month  ACTIVITY Samantha works as a sales: agent at a luxury jewelry store. She earns a base monthly salary of ₱25,000, plus a commission structure based on her total sales. Samantha receives a 4% commission on sales up to ₱100,000 and a 7% commission on any sales above ₱100,000. In one month, Samantha sold jewelry worth ₱150,000. 1. How much commission does Samantha earn from her sales up to ₱100,000? 2. How much commission does Samantha earn on the sales above ₱100,000? 3. What is Samantha’s total salary for the month, including her base salary and commissions?  ACTIVITY James works as a :real estate agent and earns a 2.5% commission on any property he sells. For properties that sell for more than ₱5,000,000, he earns an additional 1% commission on the portion of the sale above ₱5,000,000. This month, James sold two properties; first property sold for ₱4,200,000, second property sold for  ACTIVITY Angela works as a sales agent at Dynamic Appliance Center. She: was able to sell a Smart TV which costs ₱57,480 that was on installment for three months without interest. The customer will pay ₱19,160 each month. Angela is entitled to get 1.5% commission on the first month. Commission decreases by 0.5% every month thereafter and computed on the outstanding balance for the month. How much commission will she receive on the first month, on the second month and on the third  ACTIVITY A sales agent receives ₱12,000 a month corresponding to a: sales of ₱30,000 worth of goods. Furthermore, he receives an additional 6% commission for all sales beyond his monthly quota but not greater than ₱50,000. An additional 3% commission is for sales beyond ₱50,000. If his sales is ₱70,000 for the month, how much is his salary --- E N D ---