5.4 - Commission and Graduated Commission

5.4 - Commission and Graduated Commission

Vocabulary

• Commission: an amount of money you are paid for selling a product or service

• Straight Commission: when commission is your only form of pay

• Commission Rate: either a specified amount of money paid for each sale or a percent of the total value of your sales

• Minimum Salary: when commission isn't the only form of pay. In most cases, you are paid a base salary and and earn commission in addition to this

How to Calculate Commission

 $straight\ commission\ =\ total\ sales\times commission\ rate$ 

Remember to turn any percentage into a decimal by moving the decimal point two spaces to the LEFT.

Example: 7.5% commission rate, $290,000 in sales. How much commission was earned?

• Commission Rate = 0.075

• Total Sales = $290,000

•  $straight\ commission\ =\ \left(0.075\right)\left(290,000\right)$  

•  $straight\ commission\ =\ \text{21,750.00}$  

Example: minimum salary is $1,850, 6.25% commission rate, $32,640 in sales. How much was earned in total?

•  $commission=\left(0.0625\right)\left(32,640\right)=2,040$  

•  $salary\ +commission\ =\ 1,850+2,040=3,890\$  

Vocabulary

• Graduate Commission: a different commission rate for different levels of sales

Discussion

Why would a company pay its employees using a graduated commission scale?

Example

Total Sales: $9840

•  $\left(1,000\right)\left(0.04\right)=40.00$  

•  $\left(2,000\right)\left(0.06\right)=120.00$  

• Remaining Sales: $6,840 $\left(6,840\right)\left(0.08\right)=547.20$  

•  $40+120+547.20=707.20$  

Homework

5.4 - Commission and Graduated Commission (Wizer)