Graduated Commissions
General Explanation
If a worker is paid a graduated commission, his commission rate increases as his sales increase. Generally, a graduated commission will offer a different commission rate for several distinct levels of sales.
An employer may offer a graduated commission in order to encourage workers to sell more because they will earn more money for increased sales. Sample Problem
Ann Marin sells appliances. She receives a graduated commission of 6% on her first $3000 of sales, 8% on the next $5000, and 10% on sales over $8000. If Ann has sales of $9000 during the week, what is her commission for the week?
Solution
Since Ann receives a graduated commission, we will have to add the commissions she receives at all levels of sales.
She will receive a commission of 6% of the first $3000 in sales and 8% of the next $5000 in sales. She will receive a commission of 10% for sales over $8000. Since her total sales were $9000, her sales over $8000 are $1000 ($9000 - $8000). Let's find her commissions at each level. First $3000: $3000 x .06 = $180 Next $5000: $5000 x .08 = $400 Over $8000: $1000 x .10 = $100Ann's total commissions are $180 + $400 + $100 = $680 |