Learning

Activity
Sheets
Business Mathematics

2nd Quarter

Prepared by: Hazelyn J. Virey

 Learning Activity Sheet: Key Concepts
Week
in Buying and Selling
1
MELC 15-
BACKGROUND INFORMATION FOR LEARNERS 17

Commissions
In business, a commission is the compensation paid to the person or entity based on the sale of a product;
commonly calculated on a percentage basis. Salesmen, agents, and brokers are generally paid
commissions as incentives for increasing a firm’s sales. Salesmen are employees of the firm either paid on
a straight commission basis or on a salary plus commission basis. Agents and brokers are generally not
employees of the firm and paid commissions only.
If a sales agent earns a basic monthly salary of P10,000.00 and is paid a 3% commission on all his or her
sales for the month, he or she will have a gross earnings of basic salary plus commission. If he or she sold
P30,000.00 for the month, her gross earnings and commission will be:

Gross Earnings = Basic Salary + Commission

P 10,000 + 3% x P30,000
= P 10,000 + P900
= P 10,900

Types of Commissions
 Plain Commission
Most sales agents earn commissions only. They are not paid any salary. Therefore, they exert their
best effort to increase their sales because the more they sell, the more they earn. Compitation of
the commission makes use of the basic formula we learned, P= BR. The commission is the
percentage (P), the sales is the base (B), and the commission rate is the rate (R).
Examples:
1. Carmen Yambao is the slaes agent for the High Ace Realty. She is paid based on commission
only. She is given a 2% commission on her slaes. For the current month, her sales was
P1,035,000.00. Her commission (which is also her gross earnings) would be:
Commission = P1,035,000 x 2%
= P20,700

2. Jed Montenegro is a car sales agent. He is paid commission only at the rate of 2.5%. for the
current month, he sold two cars totaling P1,875,000.00. his commission (gross earnings) would be:
Commission = P1,875,000.00 x 2.5%
= P46,875.00

 Commission and Salary

Generally, if a person is employed by a firm as a salesman, he or she is given a basic salary in
addition to the commission he or she is given on his or her sales. His or her gross earnings,
therefore, are equal to:
Gross Earnings = Basic Salary + Commission

Using our foregoing examples for commission only, and assuming that Carmen Yambao and Jed
Montenegro are employees with basic salary, the gross earnings of Carmen and Jed would be as
follows:
1. Carmen Yambao’s gross earnings assuming a basic salary of P10,000.00 per month:
Gross Earnings = Basic Salary + Commission
= P10,000 + P1,035,000 x 2%
= P10,000 + P20,907
= P30,907

2. Jed Montenegro’s gross earnings assuming a basic salary of P12,500.00 per month:
Gross Earnings = Basic Salary + Commission
= P12,500 + P1,875,000 x 2.5%
= P12,500 + P46,875
= P59,375
  Overrides
For people who have people under them doing the sales, overrides are given by their companies in
addition to their basic salary. Product managers and sales or marketing managers earn overrides.
For example:
M. Coronilia is a product manager with five sales representatives under him. The company gives
him an annual salary of P126,000.00; commission of 5% on his own sales; and an override of ½%
on his men’s sales. Find his gross earnings for the month if his total sales is P365,500 with his men
able to sell a total of P1,548,263 for the month.
Given: Annual salary = P 126,000
His sales = P 365,500
His men’s sales = P 1,548,263
His commission = 5% of his sales
His override = ½% of his men’s sales
Find: Gross Earnings of M. Coronilia
Solution:
Commission = 5% x his own sales
= 5% x P 365,500 = P 18,275.00
Override = ½% x his men’s sales
= 0.005 x P 1,548,263 = 7,741.32
Basic Salary = Annual Salary
12
= P 126,000
12 = 10,500.00
Gross Earnings = P 36,516.32

 Commission on Sales in Installment Basis

What we have so far are commissions on cash basis, that is for cash sales. If the sales are on
installment basis, companies do not give commission based on sales. Rather, they are given
commission based on collection, that is, payment made by buyers. Assuming a sale of P
120,000.00 paid in monthly installments of P 10,000.00, the commission is based on the P
10,000.00 payment made by the buyer. Therefore, if the commission paid is, say, 3%, the monthly
commission would be 3% x P 10,000 = P 300.

LEARNING COMPETENCY WITH CODE

 Illustrate the different types of commissions(MELC 15 or CG: ABM_BM11BS-IIa-11)

 Compute commissions on cash basis and commission on installment basis (MELC 16 or
CG: ABM_BM11BS-IIa-12)
 Compute down payment, gross balance and current increased balance (MELC 17 or CG:
ABM_BM11BS-IIa-13)

DIRECTIONS/ INSTRUCTIONS

I. True or False
Directions: Write TRUE if the statement is correct and FALSE otherwise.
___________1. In business, a commission is the compensation paid to the person or entity based on
the sale of a product.
___________2. Most sales agents earn commissions only.
___________3. For people who have people under them doing the sales, overrides are given by their
companies in addition to their basic salary.
___________4. Product managers and sales or marketing managers earn overrides.
___________5. If the sales are on installment basis, companies do not give commission based on sales.
___________6. Sales agents are generally paid commissions as incentives for increasing a firm’s
sales.
___________7. In certain cases, managers are given transportation allowance and/ or
representation allowance.
___________8. If the sales are on installment basis, they are not given commission based on
collection.
___________9. Plain commissions are an opportunity to reward employees for their success.
___________10. A salary with commission is the most common type of commission structure.

EXERCISES/ ACTIVITIES

Directions: Answer the following and provide your solution.

 In certain cases, however, a sales employee that is given a basic salary earns commission
on sales above a certain figure. For example, Eugene Tito is a sales representative earning
a basic salary of P 18,000.00 a month plus 3% commission on his sales exceeding his
quota of P 15,000.00. Assume he made a total sales of P36,000.00 for the current month.
Find his gross earnings.
Given: P 18,000 Basic Salary per month
3% Commission on sales above P 15,000 (Sales- Quota)
P 36,000 = Total Sales
Find: Gross Earnings

 Still in certain cases, a sales employee is paid a basic salary and a graduated commission
based on his sales above quota. For example, Gem Bandivas is paid a basic salary of P
9,400.00 a month plus commission on all sales above her quota of P 30,000.00 a month
according to the following schedule:
1% on first P 20,000
2% on next P 20,000
3% on sales above quota exceeding the foregoing P 40,000
Compute for her gross earnings if she sells a total of P 75,360.00 for the past month.
Given: Monthly salary = P 9,400
Sales quota = P 30,000
Sales = P 75,360
Commission = see schedule above
Find: Gross Earnings

Prepared by:

HAZELYN J. VIREY
Subject Teacher