Business Mathematics Quarter 2 Module 1 Week 1-2

Accountancy, Business and Management (Aurora State College of Technology)

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11

Quarter 2 – Module 1:
Commissions

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 What I Need to Know

Hello! In your previous lessons, you have learned how determine whether a
business earned a profit, lose money or have a break - even. This time, you will learn
how commission works.

After going through this module, you will be able to:

1. Illustrate different types of commission;

2. Compute commission on cash basis and commission on installment basis; and
3. Compute down payment, gross balance and current increased balance.
4. Solving problems involving commission

What I Know
Before you begin with this module, grab your pen and answer this test to find out
what you already know about this lesson.

Direction: Read each question carefully and encircle the letter of your answer.

1. Which of the following individual earns commissions?

a. Tricycle Driver b. Teacher c. Insurance Agents d. Clerks

2. What type of commission is earned when a certain percentage of sales is

directly taken from the total sales as the commission?
a. Straight c. Graduated
b. Salary + Commission d. Commission + Bonus

3. A car agent successfully sold a unit amounting to P600,000. If he earned P30,000

from this sale, how much is the commission rate?
a. 3% b. 4% c. 5% d. 6%

4. Ms. Janina works as a saleslady in a mall. She earns a uniform monthly

compensation and additional amount base on the sales she makes. What type of
commission is she involved in?
a. Straight c. Graduated
b. Salary + Commission d. Commission + Bonus

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5. Leo earns 2% commission for sales amounting to P100,000, 3% commission for
sales amounting to P200,000 and 5% commission for sales exceeding P500,000. What
type of commission is he engaged in?
a. Straight c. Graduated
b. Salary + Commission d. Commission + Bonus

6. How much commission will an individual earn if he sold P15,000 worth of goods at
a commission rate of 3.5%?
a. P 500 b. P525 c. P 5000 d. P5250
7. Laura earns 5% commission from her sales and 3% commission from the sales
of her representatives. If she was able to make a total sales of P62,000 and her
representatives was able to make a total sales of P123,000, how much is her total
commission?
a. P 6970 c. P 7960
b. P 7690 d. P 9760
8. What percent of commission is earned if the sales agent received P23,180 from
sales amounting to P152,670?
a. 18.15% c. 11.85%
b. 15.18% d. 15.81%
9. How much sales did an agent make if he received P25,812 from
7.12% commission?
a. P 326,528 c. P 236,528
b. P 365,228 d. P362,528
10. A sales representative earns 2% commission for sales amounting to P10,000,
another 3% commission for the next P30,000 and 5% for sales exceeding P40,000.
How much will he earn if he is able to make a total sales of P75,000?
a. P 5,320 c. P 3,230
b. P 3,250 d. P 5,230

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 Lesson
Commissions
7

In the world of business, there are different ways on how you can earn money
or how you can pay your employees. One way is through commissions. Commissions
play a very important role in the operations of business. This lesson will discuss how
commission works. Good luck!

What’s In
Before proceeding to the new topic, let us first have a review from your previous lesson.
Activity 1: Let us Review!
Determine what value/term that is being represented by the following formula:
1. Quantity sold x Selling Price =
2. Quantity sold x Cost per unit =
3. Net Sales > Total Cost -
4. Net Sales < Total Cost -
5. Net Sales = Total Cost -

What’s New

You may now proceed to the next activity!

Activity 2: Guess What

Direction: Determine the profession of each individuals shown in the following pictures
then answer the follow-up questions below.

1. 2.

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3. 4.

Follow-up questions
5.

1. What nature of business do the

following persons are engaged to?

2. How do you think they earn money

from what they are doing?

3. Do you want to be like them? Why?

What is It
COMMISSION

Commission is a way of compensation mainly used to pay employees who sell

company’s commodities or services.

- A fee that a business pays to a salesperson (agent) in exchange for his services
in either facilitating, supervising or completing sale.
- This may be based on a flat arrangement or as a percentage of the revenue
generated by a salesperson.
-

TYPES OF COMMISSION

A. Straight commission – type of commission wherein the salesperson’s earning or

wage is based on his/her commission alone.

Formula:
Commission = Commission rate x Amount of Sales

Amount of Sales = 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛

𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑅𝑎𝑡𝑒

Commission Rate = 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛

𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓𝑆𝑎𝑙𝑒𝑠

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Example 1: A real estate agent earns commission at a rate of 4%. If he successfully
sold a piece of property for P740,000, what is his commission?
Solution:
Commission = Commission rate x Amount of Sales
= (0.04)(740,000)
= P29,600

Example 2: If the commission on the sale of P16, 950 worth of clothes is P1, 271.25,
what is the commission rate?
Solution:
Commission Rate = 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛
𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓𝑆𝑎𝑙𝑒𝑠
1,271.25
= 16,950
= 0.075 or 7.5%

Example 3: Melissa Parilla, owner of lending company; paid her collector P3, 302 as a
commission at 1.3%. What was the amount of collection?
Solution:
Amount of Sales = 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛
𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑅𝑎𝑡𝑒
3,302
= 0.013
= P254,000

B. Graduated Commission or Incremental Commission – type of commission given

to salespersons who do not receive a regular salary and commission rate increases
as the sales volume increases.

Example: Evelyn de Guzman sells OHP projectors for WSS Tech Products. She is on
incremental commission schedule of 2.5% of sales up to P100, 000, 3% for the next
P150, 000 and 4% on sales greater than P250, 000. What is Evelyn’s total gross pay for
last month if her sales volume was P300, 000?

Solution:
Commission rate (level1) = 0.025
Commission rate (level2) = 0.03
Commission rate (level3) = 0.04
Level pay 1 = 100, 000 x 0.025 = 2, 500
Level pay 2 = 150, 000 x 0.03 = 4, 500
Level pay 3 = 50, 000 x 0.04 = 2, 000
Total gross pay = 2, 500 + 4, 500 + 2, 000 = P9,000

C. Salary plus commission – when an employee is being paid a guaranteed salary

plus a commission on total sales made by the employee.

Example: Jayney dela Fuente works on a pay schedule of P21, 300 per month plus a
3% commission on all sales. If he sold P104,900, what is Jayney’s total gross pay?
Solution:
Total Compensation = Salary + Commission

Commission = Commission rate x Amount of Sales

= (0.03) (104,900) = 3,147

Total Compensation = 21, 300 + 3, 147 = P24, 447

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D. Commission and Bonus – when a salesperson is given a bonus if he/she exceeds
his/her sales quota.

Example: Leonora Bautista receives a basic salary of P13, 750 a month. She also
receives a bonus of 5% of the amount of sales she made exceeding her quota of P75,000.
For the month of December, the total amount of sales she was able to make is P128,000.
What is her total earnings for the month?

Solution:
Total Compensation = Salary + Commission(Base on excess of her quota)

Commission = Commission rate x Excess in Amount of Sales

= (0.05) (128,000 - 53,000) = 2, 650

Total Compensation = 13, 750 + 2, 650 = P16,400

E. Commission with overrides – when a salesperson earns commission on his/her

own sales and also earns commission from the sales of his/her representatives.
Example: Teresita Cadauan receives a 6% commission on her sales. She
supervises
12 sales representatives and receives a 2.5% override on all their sales. The
representatives made sales of P48, 300 and she made sales of P9,400. What were
her earnings?

Solution:

Commission 1 = Commission Rate x Amount of Sales

= (0.06)(9, 400)
= P564
Commission 2 = Commission Rate x Amount of Sales
= (0.025)(48, 300)
= P1, 207.50
Total Commission = 564 + 1, 207.50
= P1, 771.50

COMMISSION ON CASH AND INSTALMENT BASIS

Commission on cash basis – this is similar to computing straight commission which

is computed by directly multiplying the commission rate to the total amount of sales.

Example: Mike works at ABC gadget store. For every cash purchase of cell phone, he
gets 6.1% commission. In particular month, he was able to sell 10 cell phones costing
P18, 000 each. How much was his total commission for such cash sales?

Solution:
Total Sales = P18, 000 x 10 unit of cell phones = P180, 000
Cash commission = P180, 000 x 0.061 = P10, 980

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Commission on instalment basis – the commission is computed based on the
instalment periods.

Example: At ABC Gadget store, some items are paid on instalment basis through
credit cards. Mike was able to sell 10 cell phones costing P18,000 each. Each
transaction is payable in 6 months equally divided into 6 equal instalments without
interest. Mike gets 2% commission on the first month, for each of the 10 cell phones.
Commission decreases 0.30% every month thereafter and computed on the
outstanding balance for the month. How much commission does Mike receive on the
first month?2nd,3rd,4th,5th, and 6th month? At the end of instalment period, how much
is his total commission?

Solution:
First month commission: P18,000 x 10 cell phones x 0.02 = P3, 600
2nd month = P15, 000 x 10 cell phones x (0.02-0.003) = P2,550
3rd month = P12, 000 x 10 cell phones x (0.017-0.003) = P1,680
4th month = P9, 000 x 10 cell phones x (0.014-0.003) = P990
5th month = P6, 000 x 10 cell phones x (0.011-0.003) = P480
6th month = P15, 000 x 10 cell phones x (0.008-0.003) = P150
Total commission = P9,450

What’s More

You are doing great! I hope that you have learned a lot from the examples
presented in this module. Now, to o test your understanding, answer the following
activities. Good luck and keep learning!

Activity 3: Solve this!!

Direction: Solve and analyze what type of commission is the problem below and show
your solution.

1. A real estate agent gets 4.5% on the price of the house he sells. If he sells a
house for P1,250,000, how much does he earn?

2. A realtor makes a commission of P315,700 on a 2.87 million house she sells.

What is her commission rate?

3. Richard receives a commission of 1.2% on the sales he make for the first
P10,000, 2.4% on the next P15,000 and 3.6% on all sales in excess of P25,000.
What did he receive last month for sales amounting to P60,000?

4. Enrico receives a monthly salary of P17, 500 basic pay and a commission of 8.7%
monthly sales. What is his gross pay if his sales is P480,000?

5. A sales manager has 30 sales representatives. She receives a commission of

22% from her own sales and 6% overrides. During the month of July she made
sales amounting to P80,000 and her representative made P210, 000. What is
her total earnings?

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Activity 4: Which is better?

Direction: You have to find out which is the better deal, show the solution on how you
come up with your answer.

1. If you will be hired as a sales agent, which offer will you accept:
a) made sales of P1, 000, 000 condominium with 8% commission; or
b) given a 3% for 250, 000 sales, 4% for P300, 000 sales and 6% that goes
beyond P500, 000 where your possible sales will only fall up to P600, 000
monthly.

2. Which is better:
a) basic pay of P3,500 plus commission of 8% for sales of P120,000; or
b) sales of P500,000 with a commission of 6%

3. Which is better:
a) basic pay of P4,500 plus 5% commission from sales of P80,000; or
b) basic pay of P6,800 and commission of 3% for sales beyond P80,000.
Sales at the end of the month is P90, 000

What I Have Learned

It is great to know that you put a lot of effort in answering Activity 3 and Activity
4. Now let us summarize what you have learned in this lesson.

Complete the following sentences.

I HAVE LEARNED THAT:

1. Straight Commission is
2. Graduated commission is
3. Commission with override is
4. Salary plus commission is
5. Commission and bonus is

What I Can Do

Finally! You are now going to apply what you have learned in this module by
answering the next Activity. Stay positive and enhance your learning!

Activity 5. What’s the difference?

Differentiate commission on cash basis and commission on instalment basis by
solving your self-made problem. (10 pts.)

Rubrics: Clarity(3pts), Organization(3pts.), Solution(4pts)

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 Assessment

Congratulations! You did well in this module. To check the knowledge and skills
you have gained in this lesson, a post test is prepared for you.

Direction: Read each question carefully. Write the answer on a separate sheet of paper.

1. Type of commission where a sales agent receives payment from his/her

commission alone.
a. Incremental c. Salary plus commission
b. Straight d. Commission with override
2. Type of commission earns from your sales and sales of your representative.
a. Incremental c. Salary plus commission
b. Straight d. Commission with override
3. Type of commission that is not receives regular salary and
commission increases as sales volume increases.
a. Incremental c. Salary plus commission
b. Straight d. Commission with override
4. Type of commission where sales agent receives basic pay plus a commission of
his/her sales.
a. Incremental c. Salary plus commission
b. Straight d. Commission with override
5. A compensation used to pay employees who sell company’s commodities or
services.
a. Gross pay c. Net pay
b. Salary d. Commission

6. Allan receives salary of P15,000 and have a 5% commission if he exceeds from

his quota of P25, 000. What type of commission is this?
a. commission and bonus c. Salary plus commission
b. Straight d. Commission with override
7. Gina made sales of printer for Epson. She is entitled to receive a 3% for a sales
of P15, 000, 4% for 25, 000 and 4.5% for sales exceeds P30, 000. What type of
commission is given to her?
a. Incremental c. Salary plus commission
b. Straight d. Commission with override
8. JK made sales of rubber shoes worth P22, 000 and he is receiving 3%
commission from his 5 representatives. What type of commission he receives?
a. Incremental c. Salary plus commission
b. Straight d. Commission with override
9. JP is a real estate agent that made sales of 1 parcel of land. He receives 8%
commission from his sales of P500, 000. What type of commission he receives?
a. Incremental c. Salary plus commission
b. Straight d. Commission with override

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 10. Kath made sales of P150, 000 and receives 5, 000 as commission for this sale
with a 3% rate? What type of commission is given to her?
a. Incremental c. Salary plus commission
b. Straight d. Commission with override

Additional Activities

You are now about to apply what you have learned in this lesson in real-life
scenario. By looking at the situations of the business establishments around you, do
the activity below.

Activity 6: Commissions in my community

List at least 5 individuals in your community which earn money through

commissions. Determine the type of commission in which they earn money and
briefly describe the nature of work of each individual.

Example:

Baker – earns Straight Commission – Bakers in our community earned commission

for every piece of bread that they make. For example, they earn 25 centavos for every
piece pandesal they are able to make.

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 PEREZ NATIONAL HIGH SCHOOL

Senior High School Department

SUPPLEMENTARY LEARNING MATERIAL(SLM)

Business Mathematics

Prepared by:
Engr. Mark Daries Q.
Sardea

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