The simplest type of commission problem involves is finding the commission when the rate of commission is a uniform amount for each item transacted. Example: A newsboy receives $.15 for each Weekly Women’s Magazine that he sells. What is the amount of his commission, if he sells 125 copies? Solution: 125 x $0.15 = $18.75.
If the rate of commission is expressed as per cent, the commission is based on the total amount transacted. And the formula used is: Commission = Sales x Rate of Commission. Example: Marvin Rock sold through a real estate agent, a house and lot for $170,000.The agent charged 5 ½% of the sale price for his services. How much was his commission? Solution: $170,000 x .055 = $9,350.
If commission and sales are known and the rate of commission is unknown, the relationship may be re-expressed as: Rate of Commission = Commission + Sales. Example: An agent received a commission of $99.00 for selling a refrigerator worth $1,800.00. What was his rate of commission? Solution: $99.00/$1,800.00 = .055 or 5.5% or 5 ½%.
If commission and rate of commission are known and the sales are unknown, the relationship may be re-expressed as: Sales = Commission/Rate of Commission. Example: For selling a 1975 Toyota car, Peter Marx received $1,365.00 which is 7% of the purchase price of the car. At what price was the car sold? Solution: $1,365.00/.07 = $19,500.00
Commission merchants may be paid on a straight commission basis, on a salary-and-commission basis, and on a graduated commission basis. In the cases where payments are made on a salary-and-commission basis, the commission is usually based on a fixed amount of sales known as quota. Under this, the salesman receives only his
Example: John Martin, a salesman, receives a monthly salary of $550.00 plus 3% commission on sales over $50,000.00. What was his total earning during the month of May if his sales amounted to $63,415.00?
$63,415.00 - $50,000.00 = $13,415.00
$13,415.00 x .03 = $402.45 (commission)
$402.45 + $550.00 = $952.45 (total earnings)
Some business firms do not pay any regular salary to their salesman, especially if they are new with the company. Instead, a form of graduated commission is offered. Later, when the salesman has proven himself capable, then a regular salary may be given in addition to a percentage commission.
Example: George Ken of International Mutual Fund and Investment Corporation receives a commission of 3% on the first $12,000.00 sale, 4% on the next $12,000.00 and 5%on all sales in excess of $24,000.00. What commission did he get last month for sales which amounted to $30,000.00?
$12,000.00 x .03 = $360.00
$12,000.00 x .04 = $480.00
$6,000.00 x .05 = $300.00
Total Commission: $1,140.00
Commission or brokerage is an allowance or percentage made to a person for performing a business services, like buying or selling goods or property and collecting money for another. Commissions provide additional incentives for the salesman to increase his sales; a person whose compensation is partly or wholly in terms of commissions is referred to as an agent, a solicitor, a broker or simply a commission merchant. The individual or business firm for whom the commission merchant acts is called the principal.
Source of idea: my old notes when I took up Business Mathematics