1. Commission 9-27-11

2. DO NOW… A real estate broker charges a 6% commission. Find the commission on a house selling for $268,500.

3. DO NOW… $16, 110 $268,500 x 6% = $268,500 x.06 = $16, 110 Commission Rate

4. Commission Rate Pays a salesperson either a fixed percent of sales or a fixed amount per item sold. Pays a salesperson either a fixed percent of sales or a fixed amount per item sold. Designed to produce maximum output from the salesperson since pay is directly dependent on sales Designed to produce maximum output from the salesperson since pay is directly dependent on sales Straight Commission Graduated Commission (Variable, Sliding Scale) Salary Plus Commission

5. Straight Commission Salesperson is paid a fixed percent of salesFormula: Gross Earnings = Commission Rate x Amount of Sales

6. Straight Commission An advertising sales rep is paid a 20% commission. Find the commission earned on sales of $2,368.40. $2368.40 x.20 = $473.68

7. Subtracting Returns Before the commission is calculated, any returns from customers, or any allowances, such as discounts, must be subtracted from sales A company will not pay a commission on sales that are not completed Returns/Allowances must first be subtracted from gross sales Then multiply the difference (Net Sales) by the commission rate

8. Subtracting Returns Anthony, a vitamin sales rep, had sales of $10,230 one month, with returns and allowances of $1,120. If his commission rate is 12%, what are his gross earnings? Gross Earnings = ($10,230 gross sales - $1120 Returns/Allowances) x 12% Gross Earnings = $9,110 Net Sales x.12 Gross Earnings = $1,093.20

9. Subtracting Returns Amanda, an Avon salesperson, had sales of $45,350 one month, with returns and allowances of $432. If her commission rate is 18%, what are her gross earnings? Gross Earnings = ($45,350 gross sales - $432 Returns/Allowances) x 18% Gross Earnings = $44,918 Net Sales x.18 Gross Earnings = $8, 085.24

10. Graduated Commission Method of pay designed to retain top-producing salespeople Method of pay designed to retain top-producing salespeople A higher rate of commission is paid as sales get larger and larger A higher rate of commission is paid as sales get larger and larger

11. Graduated Commission Nicole sells food and bakery products to Starbucks, and is paid as follows: Find her earnings if she has sales of $32, 768 one month. SalesRate Up to $10,000 6% $10,000 - $20,000 8% $20,000 and up 9% $32,768Total Sales -$10,000First $10,000$10,000 X.06= $600.00 $22,768 -$10,000Next $10,000$10,000 X.08= $800.00 $12,768Over $20,000$12,768 X.09= $1149.12 $32,768 Total Sales $2,549.12 $2,549.12 Total Commissions

12. Graduated Commission Mark sells office copiers and is paid a graduated commission rate. His commission rate on sales up to $20,000 is 2%; sales of $20,001 to $30,000, 2.5%, and sales of $30,001 and up, 3%. If he has sales of $38,400, find the commission earned. $38,400Total Sales -$20,000Up to $20,000$ 20,000 X.02= $ 400 $18,400 -$10,000Next $10,000$ 10,000 X.025= $ 250 $8,400$30,001 and up$ 8,400 X.03= $ 252 $ 38,400 Total Sales $ 902 $ 902 Total Commissions

13. Salary + Commission Salesperson is paid a fixed sum per pay period, plus a commission on all sales Salesperson is paid a fixed sum per pay period, plus a commission on all sales This method is commonly used by large retail stores This method is commonly used by large retail stores Formula: Gross Earnings = Fixed Amount per Pay Period + Amount Earned on Commission

14. Example Gary’s straight time salary is $500 per week. This week his total sales were $2,500, and $75 was returned merchandise (goods returned by customers). His quota is set at $1,700. His commission is based on 6% of sales minus returned merchandise after he has met his quota.

15. Steps 1. 1. Determine the amount of actual sales by subtracting the amount of returned merchandise from this week’s total sales $2,500 - $75 = $2,425 Actual Sales 2. 2. Determine the amount of sales above quota on which Gary will receive a commission by subtracting the quota from his actual sales $2,425 - $1,700 = $725 Sales Above Quota 3. 3. Multiply sales above quota by percent to determine Gary’s commission $725 x.06 = $43.50 Commission 4. 4. Add weekly salary to commission to obtain this week’s gross earnings $500 + $43.50 = $543.50 This week’s gross earnings

16. Your Turn Diana is paid $325 per week by Rugolo’s Creations, plus 3% on all sales over $500. During a certain week, her total sales were $2972. Find her gross earnings. Gross Earnings =3% on sales above $500 + Weekly Salary =.03 * ($2972 - $500) + $325 =(.03 X $2472) + $325 =$74.16 + $325 =$ 399.16

17. Class Work Get your workbooks Get your workbooks Turn to Sections 1-6/7 on Page 5 Turn to Sections 1-6/7 on Page 5 Complete questions 1-9 Complete questions 1-9