Section 1-6 Commission

If you choose a job in sales, you will most likely be paid according to a rate of commission. Commission is based on an amount of money, usually a percentage of the total sale or possibly a fixed amount of money based upon the price of a product or service. For example, with a commission rate, if you sold fax machines of a variety of features and prices, you would receive a percent of the value of the fax machines you sold or a specified amount of money per item sold. The following examples show the two different calculations of commission.

Example 1 – Computing commission on a specified amount per item:

Fax machines sold = 32;
Specified amount per item = $20;
32×$20=$640.

Example 2 – Computing commission on a percentage of value:

Fax machines sold = 32;
Total value of fax machines sold = $6,400;
Percentage of value = 10%;
$6,400×10%( $640 ).

In the above examples, the commission turned out to be the exact same amount; however, this will not always be the case.

Now examine Example 1 on page 103 of your textbook. The example takes you through the process of computing commission, given a commission rate. Be sure to convert the fraction of the percent to a decimal before multiplying by the total sales. The bottom of the example guides you through the steps in using a calculator with a percent key.

NOTE: For exercises 13 through 18, the salesperson will receive either the minimum monthly salary or the monthly commission not the sum of both. Detailed explanations are given for the even-numbered answers.