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Types of Commission

The document discusses different types of commission structures: 1) Straight commission pays a percentage of total sales. 2) Salary plus commission provides a base salary plus a percentage of sales above a threshold. 3) Graduated commission uses different percentages that increase as sales increase. 4) Salary plus bonus pays a base salary plus a bonus if sales exceed a quota. 5) Override commission provides additional commission for managers based on sales of their representatives. Examples are provided to illustrate how to calculate earnings under each structure.

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Kylee Nathaniel
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57 views13 pages

Types of Commission

The document discusses different types of commission structures: 1) Straight commission pays a percentage of total sales. 2) Salary plus commission provides a base salary plus a percentage of sales above a threshold. 3) Graduated commission uses different percentages that increase as sales increase. 4) Salary plus bonus pays a base salary plus a bonus if sales exceed a quota. 5) Override commission provides additional commission for managers based on sales of their representatives. Examples are provided to illustrate how to calculate earnings under each structure.

Uploaded by

Kylee Nathaniel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Lesson 1

1. Illustrate the different types of


commission
2. Compute commission on cash basis,
commission on installment basis,
and compute down payment, gross
balance and current increased
balance.
Commission – is the amount of money
received by an employee or agent for
performing a business transaction or
service.
1. Straight Commission – is when a
person is paid in percentage of sales
only.
Example: Ryan receives 15%
commission on the appliances he sells.
If he sells an air condition for P35,000,
an electric oven for P9,000, and a
refrigerator for P28,000. how much
does Ryan make in commission?
 Commission
 P35,000+P9,000+P28,000 = P72,000
 P72,000 x 0.15 = P10,800.00
2. Salary Plus Commission – is when a
person is paid in percentage of sales
only plus the salary.
Example: Mike decides to work for
cellular company that will pay him
P7,000 per week and 5% of any sales
above P3,000. If he sold cellular phones
worth P20,000. What is his gross pay??
 P20,000 – P3,000 = P17,000
 Commission
 P17,000 x 0.05 = P850
 Gross Pay = P7,000 + P850 = P7,850.00
3. Graduated Commission – this is when the
percent changed based on how much someone
sells. Some firms apply the graduated
commission rates to encourages there agents
to sell more goods. Graduated commission
may be increased if the agents levels of sales
also increases sales.

Example: Edward works for the company that


pays him 1% on the first P5,000 sold, 2% on the
next P15,000 sold and 3% on all sales over
P20,000. What is his gross pay if he sells
P25,000?
 Commission
 P5,000 x .01 = P50
 P15,000 x .02 = P300

 P25,000 - (P5,000+P15,000)
 P25,000 – P20,000 = P5,000

 P5,000 x .03 = P150


 P50 + P300 + P150 = P500.00
4. Salary Plus Bonus– it is a compensation
plan where sales agent receives bonus if
they exceed their sales quota. This is to
keep agents motivated to do their works.

Example: If Sophia receives a monthly


salary of P20,000 and sells P48,000 for a
month. Her sales quota is P25,000. How
much will be her earnings if she is given a
bonus of 12% if she exceeds her sales
quota?
 Total Earnings = Salary + Bonus
 Total Earnings = P20,000+(48,000-25,000)(.12)
 Total Earnings = P20,000 + (23,000 x .12)
 Total Earnings = P20,000 + P2,760
 Total Earnings = P22,760.00

 P100,000,000.00 x 2% = 2M
5. Override Commission– it is referring to
the additional commission that sales
managers or supervisors earn from the
sales of their representative.

Example: If Phillip sales supervisor


receives 1% override commission for the
sales of his representative. If the repre
total sells is P480,000. How much is the
override commission of the supervisor
based on Phillip’s sales alone?
 Sells P480,000 x .01 = P4,800

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