# Commission

## Learn About Calculating Commission With The Following Examples And Interactive Exercises

Example 1: The Stettnisch family's house was sold for \$300,000. How much money will they have after they pay their real estate agent a 5% commission?

Analysis: Commission is paid to an employee or company as an incentive to sell more. A commission is generally a percentage of sales. The real estate agent was hired by the Stettnisch family to sell their house for a 5% sales commission.

Solution: (\$300,000)*(0.05) = \$15,000 and \$300,000 - \$15,000 = \$285,000

Answer: The Stettnisch family will have \$285,000.00 after they pay their real estate agent.

A commission may be paid in addition to a salary or in lieu of a salary. However, in this lesson we will compute straight commission only. Let's look at some more examples of straight commission.

Example 2: A stock broker receives a commission of 11% for selling annuities to her clients. If she sells \$50,000 in annuities, how much commission will she earn?

Solution: (\$50000)*(.11) = \$5,500

Answer: The stock broker will earn \$5,500.00.

Example 3: The Jones family purchases \$350,000 in life insurance from an insurance broker. How much will they pay the insurance broker if she charges a 0.5% commission?

Solution: (\$350000)*(0.005) = \$1,750.

Answer: The Jones family will pay their insurance broker a commission of \$1,750.00.

Example 4: A car salesman earns a 3% commission on sales. If he sells a car for \$27,990, how much commission will he earn?

Solution: (\$27,990)*(0.03) = \$839.70

Answer: The car salesman will earn a commission of \$839.70.

In Examples 1 through 4, a commission can be earned or paid, depending on who is the seller and who is the client. Other industries that use commissions as sales incentives include: travel agents, retail employees, pharmaceutical sales reps and computer sales reps.

Summary: Commission is an amount of money paid to an employee or company as an incentive to sell more. A straight commission is a percentage of sales.

### Exercises

Directions: Each problem below involves straight commission. Solve each problem below by entering a dollar amount with cents. Do not enter a comma in your answer. For each exercise below, click once in the ANSWER BOX, type in your answer and then click ENTER. After you click ENTER, a message will appear in the RESULTS BOX to indicate whether your answer is correct or incorrect. To start over, click CLEAR.

 1 A computer salesman earns a 5.5% commission on each sale. If he sells 5 computers in one week for a total of \$15,500, how much commission does he earn? ANSWER BOX:  \$  RESULTS BOX:
 2 The Chen family sold their house through a real estate agent for \$330,000. If the real estate agent gets a 4.5% commission, how much will the Chen family have to pay her? ANSWER BOX:  \$  RESULTS BOX:
 3 A pharmaceutical sales rep receives an 3.5% commission for selling medication to physicians. If he sells \$22,500 of medication, then how much commission will he earn? ANSWER BOX:  \$  RESULTS BOX:
 4 A department store pays an interior designer a 25% commission for sales. How much will the department store have to pay the interior designer if her weekly sales are  \$1,875? ANSWER BOX:  \$  RESULTS BOX:
 5 A wholesale food rep earns a 3.25% commission on sales. If her annual sales is \$35,000, how much commission will she earn? ANSWER BOX:  \$  RESULTS BOX: