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? |
| 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? |
| 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? |
| 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? |
| 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? |
