2. What is a commission?
A commission is a fee paid to a
personwho makes a sale.
The commission is usually a percent
of the selling price. The percent is
called the commission rate.
commission commission rate total sales
3. Types of Commissions
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?
4. 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.
5. 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, Harry will earn ₱17,700 commission.
6. 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?
7. Solution:
₱50,000 × .05 = ₱2,500
₱2,500(commission) + ₱8,000(salary) = ₱10,500
Thus, Christian will earn ₱10,500 salary and
commission.
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?
8. Solution: ₱284,400 – ₱150,000 = ₱134,400
₱134,400 × 0.06 = ₱8,064 (Commission)
₱8,064(commission) + ₱17,500(salary) = ₱25,564
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?
9. 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?
10. 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.
11. b) 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.
12. 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?
13. Solution:
Total Sales = ₱18,000/watch × 10 watches = ₱180,000
Cash commission = ₱180,000 × 6.1% = 180,000 ×
0.061 = 10,980
Thus, Kevin’s total commission is ₱10,980.
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?
14. 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?
b. Commission on Installment Basis – commission is
computed based on partial payments upon the
agreed installment method.
16. 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.
17. 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.
18. Example#2:
Companies selling houses or condo units lure buyers by
stating that no down payment is required but only a certain
amount of reservation fee. The reservation fee paid is
deductible when the buyer decides to proceed with the
purchase. Otherwise, it will be forfeited in favor of the
company. After the reservation fee has been paid, the buyer
is told to pay the monthly amortization. For instance,
₱10,000 per month for two years without interest. At the
end of two years, the remaining balance will now be
subjected to an interest either through in-house or bank
financing
19. 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”.
20. 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.
21. 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.
22. 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.
23. 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.
24.
25. Observe that for the next 3 months, a total of
₱14,386.44 has already been paid for the
credit card bills. However, only ₱5,184.56
(99,386.59 – 94,202.03) has been deducted so
far from the original debt of ₱99,386.59.
Hence, every time we keep paying only the
required minimum payment, more money goes
to interest payments rather than payment of
the actual debt.
26. Activity 1
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
27. 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:
First ₱30,000 above quota - 12%
Next ₱50,000 - 1%
Next ₱70,000 - 2%
Over ₱150,000 - 3%
Compute for his gross earnings if his sales for the
month:
a. ₱37,900
b. ₱58,200
c. ₱92,300
