Math Question - Finance?

Denim Company offers sales people the following commission structure, with commission being paid monthly:

1.00% on the first $3,000 they sell,

4.00% on the next $4,000 they sell, and

4.50% thereafter on all sales they make.

Peter, a new sales representative, made sales of $3,750 in his first month, $8,000 in his second month, and $7,200 in his third month.

 a) What were his total commissions for the first three months?

b)  What single commission rate would represent his total earnings throughout the first 3 months?

1 Answer

Relevance
  • DEBS
    Lv 7
    1 month ago

    1 to 3,000 = 1% or $30 in commission

    3001 to 7,000 = 4% or $160 commission

    >7000 = 4.5%

    As with most word problems, assumptions have to be made because they aren't clear enough:

    Assuming commissions are on a monthly basis:

    Month 1: $3,000 * 1% + 750 * 4% = $30 + $30 = $60

    Month 2: $3,000 * 1% + 5,000 * 4% = $30 + $200 = $230

    Month 3: $3,000 * 1% + 4,200 * 4% = $30 + 168 = $198

    Thus total commission = 60 + 230 + 198 = $488 for a 3 month commission rate of 2.58%. (488/18950).

    If the intent is for this to be all a cumulative commission, that changes things.

    Total sales = $18,950. $30 on first 3,000. $160 on next 4000 (up to 7000). Remainder at 4.5% = 11950 * 4.5% = $537.75. Thus total commission = $727.50 for a combined rate of 3.84%.

Still have questions? Get your answers by asking now.