BUSINESS

MATHEMATICS
Q2: WEEK 1
COMMISSIONS
• Commissions are computed as a
portion of the net sales.
Types of Commissions
1.Straight commission
2. Salary plus commission
3. Graduated Commission
1. Straight commission – This is given when a person is paid
a percentage (%) of sales only.
Examples:
a) A stock broker receives a commission of 7% for selling
annuities to her clients. If she sells ₱250,000, how much
commission will she earn?
Solution: Since the stock broker receives 7% commission
based on sales, she’ll earn:
250,000 × 0.07 = 17,500
Thus, the stock broker will earn ₱17,500 commission.
b) . Harry receives 30% commission on the appliances he
sells. If he sells a TV for ₱17,000, a refrigerator for ₱20,000
and a heater for ₱22,000, how much does Harry make in
commission?
Solution: Since Harry receives 30% commission based on
sales, he’ll earn:
(17,000 + 20,000 + 22,000) × .3 = 17,700
Thus, the Harry will earn ₱17,700 commission.
2. Salary plus commission – This is exactly as it sounds, a
person gets paid a salary and a % of sales.
Examples:
a) Christian works as a sales agent for a company and earns a
basic monthly salary of ₱8,000 plus 5% commission on all his
sales. If he made total sales of ₱50,000 for the month, how
much is his gross pay for the month?
Solution:
₱50,000 × .05 = ₱2,500
₱2,500(commission) + ₱8,000(salary) = ₱10,500
Thus, the Christian will earn ₱10,500 salary and
commission.
b) Harry decides to work for another company that will
pay him ₱17,500 per week and 6% of any sales above
₱150,000. If he sold goods worth ₱284,400, what is his
gross pay?
Solution: ₱284,400 – ₱150,000 = ₱134,400
₱134,400 × 0.06 = ₱8,064 (Commission)
₱8,064(commission) + ₱17,500(salary) = ₱25,564
3. Graduated Commission – This is when percentage (%) changes
based on how much someone sells
Examples:
a) Steve works for a company that pays him 1% on the first ₱250,000
sold, 2% on the next ₱750,000 and 3% on all sales over ₱1,000,000.
What is his gross pay if he sells ₱1,250,000?
Solution: ₱250,000 × 0.01 = ₱2,500
₱1,250,000 – ₱250,000 = ₱1,000,000
₱750,000 × 0.02 = ₱15,000
₱1,000,000 – ₱750,000 = ₱250,000
₱250,000 × 0.03 = ₱7,500
Total: ₱2,500 + ₱15,000 + ₱7,500 = ₱25,000
Thus, Steve will receive a total of ₱25,000 as his commission.
a) Ana, the assistant manager of a clothing store earns a salary
of ₱17,500 per month. She also receives a 5% commission on
the first ₱450,000 she sells, and 6% commission on sales above
₱450,000. If Ana sold ₱850,000 worth of clothes last month,
what was her total pay?
Solution: ₱450,000 × 0.05 = ₱22,500 (first commission)
₱850,000 – ₱450,000 = ₱400,000
₱400,000 × 0.06 = ₱24,000 (second commission)
₱22,500 + ₱24,000 = ₱46,500 (first + second commission)
₱46,500 + ₱17,500 = ₱64,000 (total commission plus
salary)
Ana earned a total of ₱64,000 last month.
 Cash vs. Installment
a. Computing Commissions on Cash Basis – This type of
commission is similar to computing straight commissions.
Example 1:
Kevin works at Luna’s watch store. For every cash purchase of a
watch, he gets 6.1% commission. In a particular month, he was
able to sell 10 watches costing ₱8,000 each. How much was his
total commission for such cash sales?
Solution:
Total Sales = ₱8,000/watch × 10 watches = ₱80,000
Cash commission = ₱80,000 × 6.1% = 80,000 × 0.061 = 4,880
Thus, Kevin’s total commission is ₱4,880.
b. Commission on Installment Basis – commission is computed
based on partial payments upon the agreed installment method.
Example 2:
At Luna’s store, some items are paid on installment basis through
credit cards. Kevin was able to sell 10 watches costing ₱18,000
each. Each transaction is payable in 6 months divided into 6 equal
installments without interest. Kevin gets 2% commission on the first
month for each of the 10 watches. Commission decreases by 0.3%
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? Third? Fourth? Fifth? Sixth
month? At the end of installment period, how much will be his total
commission?
Solution:
First month commission:
₱18,000/watch × 10 watches × 0.02 = ₱3,600
Second month commission:
₱15,000/watch × 10 watches × (0.02 – 0.003) = ₱2,550
Third month commission:
₱12,000/watch × 10 watches × (0.017 – 0.003) = ₱1,680
Fourth month commission:
₱9,000/watch × 10 watches × (0.014 – 0.003) = ₱990
Fifth month commission:
₱6,000/watch × 10 watches × (0.011 – 0.003) = ₱480
Sixth month commission:
₱3,000/watch × 10 watches × (0.008 – 0.003) = ₱150
His total commission for six months is:
₱2,550 + ₱1,680 + ₱990 + ₱480 + ₱150 = ₱9,450.
Note: The base price of the watch is subtracted by 3,000 for each month since it was stated
in the problem that the price is will be paid in 6 equal payments. Thus 18,000/6 = 3,000.
 THE DOWN PAYMENT
Down payment is an initial payment made
when something is bought on credit. The down
payment is a first payment that one makes when
one buys something with an agreement to pay
the rest later.
How do we obtain the down payment?
Example#1:
When one purchases a car or any big item not through cash but
installment terms, normally, a certain down payment is required of the
buyer. Car dealers normally require a minimum down payment, which is
usually 20% of the total cost of the vehicle purchased. The interest on the
remaining balance is then computed depending on the number of years a
buyer would want to amortize the remaining balance. If a car costs
₱1,000,000 and a minimum 20% down payment is required by the
company, then the buyer will have an initial cash out of ₱200,000; that is,
0.20 × 1,000,000 = 200,000. The remaining ₱800,000 will be amortized
monthly and the amount of monthly amortization depends on the number
of years the buyer will want to pay the loan. Normally, buyers prefer a 3-
year or 5-year payment period. The lesser the number of years, the
lesser the total amount paid as interest to the loan. But with this
arrangement, the monthly amortization will be considerably higher than
when one chooses to pay the balance for longer number of years.
 GROSS BALANCE
This refers to the total amount of money a bank has on
deposit before adjusting for uncleared checks or
deposits, as well as reserve requirements. That is, the
book balance is a measure of what the bank has on hand
before adding or subtracting regulatory obligations and
items that will soon appear on its books. This is the term
used by banks to describe the amount of money available
before any adjustments is made for deposits in transit,
checks that have not been cleared, and reserve
requirements and interest received from “float funds”.
Example:
A simple case of gross balance refers to what is readily
available for you to use based on your bank deposits. For
example, a check amounting to Php5,000 that has been
deposited today may not be withdrawn the next day
because it has not cleared yet. If your bank passbook
currently contains ₱30,000, you may not be able to
withdraw the whole amount yet because your gross
balance is only ₱25,000 since your check has not been
cleared yet.
 CURRENT INCREASED BALANCE
This refers to the total amount you have to pay
that includes penalties or interest incurred by
unpaid balance from a loan or payment you are
supposed to have made but was not able to do
so on time.
Example:
As of this month’s cut-off date, the current total amount due from your
purchases using your credit card is ₱99,386.59. The minimum required
payment is 5% of the total amount due. If you pay only the minimum
required payment, a financing charge of 3.4% of the remaining balance will
be charged to the next bill. Assuming you refrain from using your credit card
on any of your purchases for the next 3 months and the financing charge of
3.4% is applied every billing period, show your expected monthly bill for the
next 3 months.
Solution:
Given the current bill of ₱99,386.59, the minimum required payment is
0.05(99,386.59) = ₱4,969.33. If only the minimum required payment is paid,
then the remaining debt balance is 99,386.59 – 4,969.33 = ₱94,417.26.
Assuming there is no credit bill transactions for the next 3 months and the
only minimum required payment each month is paid, the table below shows
the monthly total amount due for each of the next 3 months.
Directions: Solve for what is being asked on each of the
given problem Show your complete solution.
1. If a car selling company asked for ₱240,000 as down
payment for a ₱1.2 million worth car, how many percent
was the down payment?
2. Ryan is a broker who earns commission of 12% on all
securities sales that he makes. For the past year, he
closed sales totaling ₱928,867. Find the amount of
commission he earned for the year
3. Dan is a sales representative receiving an annual salary of
₱120,000 plus commission on all his sales above quota of
₱25,000 in accordance with the following schedule:
Directions: Search for the words that are related to
commissions and interests in the given puzzle below. Each
word corresponds to 2 points. Good luck and enjoy!
Activity 1. TRUE/ FALSE.
Directions: Read each statement below carefully. Write “T” if the statements
are true, and “F” if the statements are false. Write
your answers in a separate sheet of paper.
1. If an employee only receives a percentage of the sales made with no
additional compensation given then, he is receiving a straight commission.
2. If an employee receives a guaranteed base salary amount and earn an
undefined amount of commission based on the amount of sales he makes,
then he is receiving a graduated commission.
3. Salary plus commission is earned as a percentage of sales that as
volume of sales increases, the amount of commission also increases.
4. The price of a house for sale is ₱5,000,000. The bank requires 15% down
payment. If a buyer wants to buy the house, then he needs to pay
₱1,125,000 as down payment.
5. A car is valued at ₱2,000,000 and the required down payment is ₱500,000. The down
payment in percentage form is 25%.
6. A salesperson is receiving a commission of 12% on all of his sales. If he was able sell
goods amounting to ₱50,000, his total commission is ₱6,000?
7. A salesperson is paid in installment basis. Assuming that he was able to sell a total
cost of ₱320,000 which will be paid in installments of ₱5,000 monthly with a commission
of 5%. At the end of the payment term, he will be able to receive a total commission of
₱14,000.
8. Charlie is a sales engineer receiving a basic monthly compensation of ₱13,500 and
1% commission on all sales. He will receive ₱14,745.8 gross earnings for the month if he
will be able to sell ₱124,580.
9. A golden bejeweled necklace was sold at ₱650,000 and will be paid in monthly
installments of ₱65,000. If the salesperson gets a 3% monthly commission, then he will
receive ₱1,950.
10. Hazel receives 20% commission on the appliances she sells. If she sells a water
heater for ₱1,500, a flat iron for ₱1,200 and a refrigerator for ₱20,000, then she’ll receive
₱5,450 as a commission.