COMMISSIONS

Prepared by: Perlyn Jay Paredes, LPT

• Commission
- is an amount received by the sales people from selling
goods or services. These are earned from sales people
working in an industry to promote sales.

• Types of Commission
-Straight Commission
-Graduated Commission
 
• Straight Commission- in this type of commission, a
salesperson earns directly from sales. This may be
amount of commission per item sold or represented
as percent from the total sales.
 
Formula

1: Commission = Fixed Commission per item x No. of Items Sold

2: Commission = Sales x Commission Rate

3: Commission = (Sales- Quota) x Commission Rate

Example 1: Manong Ben is a newspaper seller who earns
through a straight commission of P2.00 per newspaper
sold. In one week, he was able to sell 550 newspapers.
What is Manong Ben total commission for the week?

Solution:
Commission = Fixed Commission per item x No. of Items
Sold
= P2.00 x 550
= P1,100
 
Manong Ben earns P1,100 commission in
one week selling 550 newspapers.
Example 2: Jane is a sales agent of a certain product
and earns a straight commission of 8% on total sales. If
Jane’s sale reached P7, 250, what is Jane’s expected
commission from this sale?
 
Solution:
Commission = Sales x Commission Rate
= P7, 250 x 0.08
= P580

Jane’s expected commission from her sale is P580.

Example 3: Lee is paid 12% on all sales above P15, 000. If
his sales reached P28, 000, what is Lee’s commission?
 
Solution:

Commission = (Sales- Quota) x Commission Rate

= (P28, 000 – P15, 000) x 0.12
= P13, 000 x 0.12
=P1, 560

Lee’s commission is P1, 560.

Graduated Commission

-in this type of commission, the rate of

commission increases as sales also increases.
The rate of increase may not be constant, it may
be varied relative to sales intervals.
 
Example: Kat earns through commission 5% for
the first P10, 000 in sales, and 12% on all sales
above P10, 000. If Kat reached sales worth P22,
000, what is Kat’s commission?
 
 

 
So, Total Commission=
= P500 + P1, 440
= P1, 940
 
Kat’s commission for her total sales is P1, 940.
 
Solution:
Since sales reached P22, 000, Kat earns 5% commission
for the first P10, 000; that is,
 

 
Then another 12% on sales above P10,000; that is