for Learners

Business Mathematics
Second Quarter, Week 1
. Objectives:
 Illustrate the different types of commissions.
(ABM_BM11BS-IIa-11)
 Compute commission on a cash basis and installment basis.
(ABM_BM11BS-IIa-12)
 Compute down payment, gross balance, and current increased
balance.
(ABM_BM11BS-IIa-13)

Written by:

Laurence L. Qunikis
Written By: Olutanga National High School
A. Mini-Lesson:

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 salary plus commission basis. Agents are brokers
who are generally not employees of the firm and paid commission only. For
business math purposes, commissions granted to sales agents, whether they reach
their goal or not will be commissions.

Commission is a fee paid to a person who makes a sale. It is usually given

as a percent called commission rate.

There are three different types of Commission. These are Straight

Commission, Salary plus Commission, and Graduated Commission.

 Straight Commission, also called (revenue commission) – a commission

based on a percentage of sales only.
Formula
Commission = Commission rate x Total sales
Let’s try this:
Burger Machine owner gives 10% commission of hamburgers if a seller sells at the
canteen and each hamburger worth ₱25.00, How much commission will she earn
for 10 hamburgers? 30 hamburgers?
For 10 hamburgers:Total sales → 10 x 25.00 = ₱ 250.00
Using the formula; Commission = Commission rate x Total sales
= (0.10) x (250.00)
= ₱ 25.00
For 30 hamburgers: Total sales→ ₱ 750.00 Commission = ₱ 75.00
 Salary plus Commission – a commission in which a salesperson gets his
basic salary and a percentage of whatever sales he makes

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 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 Earning = Basic Salary + Commissions

= ₱10, 000 + 3% x ₱30,000.00
= ₱10, 000 + ₱900
= ₱10, 900

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  Graduated Commission – a commission, which varies according to how
much sales, is made.

Example:
1. When a man works for a company that pays him 1% the first 2, 000 sold,
2% on the next 5, 000 sold and 3% on all sales over 7, 000. What
is his gross pay if he sells 15, 000?

1st rate: 2ndrate:

(2000 x 0.01) = 20 (5000 x 0.02) = 100

(15,000 – 2,000) = 13,000 (13,000 – 5,000) = 8,000

3rd rate:
(8,000 x 0.03) = 240
Therefore his gross pay is,
(20 + 100 + 240) =
= P360

 Commission on Cash Basis.

This type of commission is like computing straight commission.

For example 1, Mike works at ABC Gadget Store.
For every cash purchase of a cell phone, he gets 6.1% commission. In a
month, he was able to sell 10 cell phones costing PhP18,000 each. How
much was his total commission such as cash sales?

Solution:
Total Sales = P18,000/cell phone x 10 cell phones
= P180,000
Cash commission = P180,000 x 6.1%
= P180,000 x 0.061
= P10,980
 Cash basis - refers to a major accounting method that recognizes revenues
and expenses at the time cash is received or paid out.
A commission on Instalment basis. Now take note that installment sale is a
financing arrangement in which the seller allows the buyer to make payments
over an extended period. The buyer receives the items at the beginning of the
installment period and makes payments over the installment period. The
commission is recognized at the time of cash collection and not at the time of
sale and depends on the agreement of the percentage given.
Example:
At ABC Gadget Store, some items are paid on an installment basis through
credit cards. Mike was able to sell 10 cell phones costing PhP18,000 each. Each
transaction is payable in 6 months equally divided into 6 equal installments
without interest. Mike gets a 2% commission on the first month for each of the 10
cell phones.

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 Commission decreases by 0.30% every month thereafter and computed on
the outstanding balance for the month.

How much commission does Mike receive in the first month? In the second
month? In the third month? In the fourth month? In the fifth month? In the sixth
month? At the end of the installment period, how much will be his total
commission?

Explanation:
If each transaction is payable in 6 months equally divided into 6
equal instalments without interest, you divide 18,000 ÷ 6 = 3,000.
So, there is depreciation 3,000 of the cell phone price from 1 st month
to 6th month. And the commission of 2% also decreases by 0.30%.

Solution:
1st month commission: P18,000/ cp x 10 cps x 0.02
= P3,600
2nd month commission: P15,000/ cp x 10 cps x (0.02 – 0.003)
= P2,550
3rd month commission: P 12,000/ cp x 10 cps x (0.017 – 0.003)
= P1,680
4th month commission: P 9,000/ cp x 10 cps x (0.014 – 0 .003)
= P990
5 month commission: P 6,000/ cp x 10 cps x (0.011 – 0.003)
th

= P480
6 month commission: P3,000/ cp x 10 cps x (0.008 – 0.003)
th

= P150
In every month, instalment commission is differed. Therefore:
Total commission = 3,600 + 2,550 + 1,680 + 990 + 480 + 150
= P9,450

 Down payment - is a first payment that one makes when one buys
something with an agreement to pay the rest later. How you obtain down
payment?
Here is an example:
 When one purchases a car or any big item not through cash but installment
terms, car dealers normally require a minimum down payment, which is
usually 20% of the total cost of the vehicle being 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
P1,000,000 and a minimum 20% down payment is required by the
company, then the buyer will have initial cash out of P200,000; that is, 20%
(1,000,000) = PhP200,000. The remaining P800,000 will be amortized
monthly and the amount of monthly amortization depends on the number of
years the buyer will want to pay the loan.

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Normally, buyers prefer a 3-year or 5-year payment period. The lesser the number
of years, the lesser the total amount of money 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 a longer number of years.

Down payment will be subtracted from the amount that you are going to purchase
in installment terms.

Example 1: If a man wishes to purchase a house selling P800,000 and he plans

to obtain a loan from his bank. The bank requires a 15% down payment. How
much is your down payment and mortgage value?

To know how much the down payment is, P800,000 times 0.15 is equal to
P120,000.

 A mortgage is a debt instrument that the borrower is obliged to pay back with a
predetermined set of payments.

Mortgage is P800,000 minus P120,000 equals P680,000.

There are two other examples which down payment is not required:

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 is
required. 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, P10,000 per month for two years without interest. At
the end of two years, the remaining balance will now be subjected to interest either
through in-house or bank financing.

Example 3: Other companies selling houses or condo units also have schemes
like requiring the buyer to pay a certain cash amount after one year aside from the
monthly amortization. The cash amount increases for the next year up to the third
year. At the end of the third year, all cash amounts and monthly amortizations paid
by the buyer are deducted from the purchase price of the unit being bought. The
remaining amount will be the one subjected to interest either through in-house or
bank financing.
But most of the companies require the buyers to have an account on the
bank which is called book balance.
So what is this Book balance or a Gross balance?
This refers to the total amount of money a bank has on deposit before
adjusting for unclear 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.

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 This is the term used by banks to describe the amount of money available
before any adjustment is made for deposits in transit, checks that have not been
cleared, and reserve requirements and interest received from “float funds”.
A certain buyer must have money on his bank. In other words, the book
balance represents the actual money accessible for a company or buyer to spend.
A simple case of gross balance refers to what is readily available for you to use
based on your bank deposits.

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 PhP30,000, you may not be able to withdraw the
whole amount yet because your gross balance is only PhP25,000 since your
check has not been cleared yet.
Your bank shows an available balance, i.e. the money in your account
available for withdrawal at the moment you ask. Let's say its P10,000.
However, you wrote your rent check for P4,000 yesterday and the landlord
hasn't cashed it yet. You wrote this down in your checkbook and deducted it from
the balance shown there your running balance. How is your checkbook now? The
difference is commonly known as "float". You only have P6,000 available
because you already spent the other P4,000.
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 to the next bill.

Example: As of this month’s cut-off date, the current total amount due from your
purchases using your credit card is P100,000. The minimum required payment is
8% of the total amount due.

If you pay only the minimum required payment, a financing charge of 4% of the
remaining balance will be charged assuming you refrain from using your credit
card on any of your purchases for the next 3 months and the financing charge of
4% is charged every billing period, show your expected monthly bill for the next 3
months.

Minimum required payment = (current bill ) x (percentage of minimum)

Minimum required payment = (P100,00 x 0.08) = P8,000
Remaining debt balance = P100,000 – P8,000 = P92,000
Assuming there are no credit bill transactions for the next 3 months and only
the minimum required payment each month is paid, the table below shows the
monthly total amount due for each of the next 3 months.

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 Time (t) Minimum require
Total amount due for the month
month payment for the month

= (100,000 x 0.08)
0 100,000
= P8,000
= (100,000 – 8,000) + 0.04 (100,000
– 8,000)
= (92,000) + 0.04 (92,000) = 0.08 x (95,680)
1
= 92,000 (1 + 0.04) = P7,654.40
= 1.04 (92,000)
= P95,680

= 1.04 (95,680 – 7654.40) = 0.08 x(91,564.6)

2
= P91,546.6 = P7,323.7

= 1.04 (91,546.6 – 7,323.7) = 0.08 x(87,591.8)

3
= P87,591.8 = P7,007.3

P21,985.4

Observe that for the next 3 months, a total of P21,985.4 has already been paid for
the credit card bills.
Meaning, every time we keep paying only the required minimum payment, more
money goes to interest payments rather than payment of the actual debt.
The minimum required payment is P8,000.00 serves as the down payment for the
loan of P100,000.00 leaving with a balance of P92,000.00 at the start of the month.
However, because there is a finance charge of 4%, if you are not able to pay for the
next month, your current increased balance will become P95,680 instead of
P92,000.
However, only P12,408.2 (100,000 - 87,591.8) has been deducted so far from the
original debt of P100,000.

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B. Guided/Practice Activity

Activity 1.
Instruction: Write the correct answer on a separate sheet of paper.
A.

Types of
Sales Rate Commission
Commission
P5, 000 20%
B.
Gross Type of
Salary Sales Rate Commission
Pay Commission
P10, 000 P25, 000 10%
C.
4% on 6% on
2% on 1st 2nd next over Gross Type of
Total Sales
5,000 sales 10,000 15,000 Pay Commission
sales sales
P24, 000

Activity 2:
Solve the given problem and show the solution.

1. A car salesman earns a 3% commission on sales.

If he sells a car for P550, 000, how much
the commission will he earn?
Answer: 16,500
2. Mr. Santos 1. _____________
is paid 1. _____________
a salary of P2, 000 a week, plus 4% commission on all sales
over P8, 000.
2. Find his gross earnings for the week in2.which
_____________ his total sale were
_____________
P15, 000? 3. _____________ 3. _____________
Answer: 2,280

3. Mr. and Mrs. Banal purchased a house and lot worth P4,000,000. They paid a
down payment of 25%. Find the amount of down payment and mortgage.

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Activity 3. Situation A

As of this month’s cut-off date, the current total amount due from your
purchases using your credit card is P 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 charged every billing
period, show your expected monthly bill for the next 3 months.

Assuming there are no credit bill transactions for the next 3 months and only the
minimum required payment each month is paid.
Fill up the table below shows the monthly total amount due for each of the next
3 months.

Minimum require
Time (t) month Total amount due for the month payment for the
month

Conclusions:
______________________________________________________________

______________________________________________________________

______________________________________________________________

_____________________________________________________________.

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C. Independent Practice Activity

Activity 1

Solve the given problem and show the solution. Write your answer on a separate
sheet of paper.

1. Mike receives a 20% commission on the appliances he sells.

If he sells a TV for P7, 000, a refrigerator for P12, 000,
and a heater for P1500, how much does Mike make
in commission?

2. Mark works at ABC Appliances Store. For every cash purchase of appliances,
he gets 6%commission. In a particular month, he was able to sell 3 cell phones
costing P8,500 each. How much was his total commission for such cash
sales?

3. Mr. Rosal bought a car. After paying the down payment of P200,000 the
amount of the mortgage is P1,000,000? Find the amount of a car and a
percentage of down payment?

4. Renzo works at Department Store. For every cash purchase of appliances, he

gets 6%commission and School supplies for 3.5%. In a particular month, he
was able to sell 5 televisions (40”) costing P13,000 each and 10 printers
costing P8,000 each. How much was his total commission for such cash
sales?

5. A college student purchased a used car for P500,000. He paid a 15% down
payment and financing charge of 6% for 18 monthly payments.
Find the amount of finance charge and current increased balance if the student
missed to pay the 1st month?

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Activity 2. WORD SEARCH
Directions: Find and encircle the 15 words that can be found in the word search
box in the form of horizontal, vertical or diagonal that related to Down payment
and Book Balance. Write your answer on a separate sheet of paper.

E R T Y O C H E C K W R O T G
B E C K H A L H E P A Y B E L
A R D E P O S I T A R O R T G
N E M O R G A R E Y U B E L F
K S H A W E Z E T A M O N E Y
C D B T R N E O S B Y O N M E
O N T I W A P C H L F K E C D
N U A N E C S A L E N B W O R
T F E P Z O I S Y T L A S E C
E T A M I U H E N M T L I F R
C A W I T H D R A W E A S O L
H O N D R S T A N D E N I T E
R L O A O T U N D S I C T R H
W F S N M O R T G A G E W A S
O K N B A K N H E C K O N E Y

Bank; Deposit; Hire; Float funds; Mortgage; Book Balance; Withdraw; Cash;
Amortize; Down payment; Buyer; Check; Payable; Sale; Money.

Activity 3.
Directions: Answer the problem showing step by step solution. Write your
answer on a separate sheet of paper.

1. Mike works for a company that pays him 2% on the first P20, 000 sold, 3%
on the next P30, 000 sold and 5% on all sales beyond P50, 000. What is
his gross pay if he sells P60, 000

10
D. Evaluation
DIRECTIONS: Read each item carefully. Write the letter of your answer on a
separate sheet of paper.

___ 1. What accounting method that recognizes revenues and expenses at the
time cash is received or paid out?
a. Rate basis c. Installment basis
b. Salary basis d. Cash basis
____2. What sales require the buyer to make several equal payments for
something, spread over an agreed time?
a. Commission c. Rate
b. Sales d. Installment
------3. How much will be his commission only in cell phones?
a. 200 c. 3,400
b. 680 d. 3,600
___ 4. What is a type of payment made in cash during the onset of the purchase of
an expensive good or service?
a. Mortgage c. amortization
b. Down payment d. book balance
___ 5. What is a loan taken to purchase property and guaranteed by the same
property?
a. Commission c. Mortgage
b. Sales d. Installment
For items nos. 6 and 7,

A local developer is selling homes for P1, 250, 000 with a required down
payment of 6%.
___ 6. What is the amount of the required down payment?
a. 60,000 c. 65,000
b. 70,000 d. 75,000
___ 7. What is the amount of mortgage?
a. 1,190,000 c. 1,175,000
b. 1,180,000 d. 1,185,000
____8 What do you call the total amount of interest and loan charges you would pay
over the entire life of the mortgage loan?
a. Finance charge c. Available balance
b. Down payment d. Current increased balance

An item is purchased for P8,000 with a down payment of P500. There is

a financing charge of 10%.
For items 9 and 10
____9. What is the amount of the financing charge?
a.750 c. 850
b.800 d. 900
____10. Find the monthly payment if 10 payments are made?
a. 800 c. 850
b.825 d. 875

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References

Source: Zita VJ Albacea, Ph.D., et al, Teaching guide for senior high school:
Business Mathematics, Commission on Higher Education, 2016 pp. 118 –
120.

Source: Steven Bragg, “How to calculate a commission,” AccountingTools

2019

Source: David Skok, “When to Pay and Account for Commissions,” for
Entrepreneurs 2016

Quality Assured by the Following:

Gay G. Aguilar, MAED

SHS – T-ll

Pede I. Casing, Ph.D. (CAR)

Team Leader

Gina I. Lihao
Education Program Supervisor in Mathematics

Reviewed by:

Evelyn F. Importante
OIC- CID Chief EPS

Jerry C. Bokingkito
OIC- Assistant Schools Division Superintendent

Raymund M. Salvador
OIC- Assistant Schools Division Superintendent

Jeanelyn A. Aleman, CESE

OIC-Schools Division Superintendent

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