BUSINESS MATHEMATICS

NAME: _______________________________________ GRADE & SECTION:___________

General Direction: Write your answers in a long bond paper or 1 whole yellow paper.
Avoid any form of erasures.

Enrichment Activity 1

Directions: Using your own words, illustrate the three types of commissions and give
one real life example for each type. Copy the format below. Write your answers legibly.

Straight Commission Commission plus Salary Graduated Commission

Enrichment Activity 2

Directions: Solve for what is being asked on each of the given problem Show your
complete solution.

1. If a car selling company asked for ₱240,000 as down payment for a ₱1.2 million worth
car, how many percent was the down payment?

2. Ryan is a broker who earns commission of 3 % on all securities sales that he makes.
For the past year, he closed sales totaling ₱928,867. Find the amount of commission
he earned for the year
3. Dan is a sales representative receiving an annual salary of ₱120,000 plus commission
on all his sales above quota of ₱25,000 in accordance with the following schedule:

First ₱30,000 above quota - %

Next ₱50,000 - 1%
Next ₱70,000 - 2%
Over ₱150,000 - 3%
Compute for his gross earnings if his sales for the month:
a. ₱37,900
b. ₱58,200
c. ₱92,300
READ AND REVIEW: LESSON # 1
Commissions are computed as a portion of the net sales. Some companies pay their
salespeople based on straight commissions. The pay of these salespeople is entirely
based on the amount of their sales. No sales means no pay. Other companies pay their
salespeople with fixed salary plus commission. Commission rates may be constant
for all sales amounts or it may be a variable scaled on the amount of sales.

Some companies make an effort to impose regular commission paydays by holding

commission pays until a designated date in releasing all commissions. For example, a
company has set some dates in April and November as paydays for all accumulated
commissions of a salesperson.

Types of Commissions

1. Straight commission – This is given when a person is paid a percentage (%) of

sales only.

Examples:

a) A stock broker receives a commission of 7% for selling annuities to her clients.

If she sells ₱250,000, how much commission will she earn?

Solution: Since the stock broker receives 7% commission based on sales, she’ll earn:
250,000 0.07 = 17,500
Thus, the stock broker will earn ₱17,500 commission.

b) . Harry receives 30% commission on the appliances he sells. If he sells a TV for

₱17,000, a refrigerator for ₱20,000 and a heater for ₱22,000, how much does
Harry make in commission?

Solution: Since Harry receives 30% commission based on sales, he’ll earn:
(17,000 + 20,000 + 22,000) .3 = 17,700
Thus, the Harry will earn ₱17,700 commission.

2. Salary plus commission – This is exactly as it sounds, a person gets paid a

salary and a % of sales.

Examples:

a) Christian works as a sales agent for a company and earns a basic monthly salary
of ₱8,000 plus 5% commission on all his sales. If he made total sales of ₱50,000
for the month, how much is his gross pay for the month?

Solution:
₱50,000 .05 = ₱2,500
₱2,500(commission) + ₱8,000(salary) = ₱10,500
Thus, the Christian will earn ₱10,500 salary and commission.

b) Harry decides to work for another company that will pay him ₱17,500 per week
and 6% of any sales above ₱150,000. If he sold goods worth ₱284,400, what is
his gross pay?
Solution: ₱284,400 – ₱150,000 = ₱134,400
₱134,400 0.06 = ₱8,064 (Commission)
₱8,064(commission) + ₱17,500(salary) = ₱25,564

3. Graduated Commission – This is when percentage (%) changes based on how

much someone sells

Examples:

a) Steve works for a company that pays him 1% on the first ₱250,000 sold, 2% on
the next ₱750,000 and 3% on all sales over ₱1,000,000. What is his gross pay if
he sells ₱1,250,000?

Solution: ₱250,000 0.01 = ₱2,500

₱1,250,000 – ₱250,000 = ₱1,000,000

₱750,000 0.02 = ₱15,000

₱1,000,000 – ₱750,000 = ₱250,000

₱250,000 0.03 = ₱7,500

Total: ₱2,500 + ₱15,000 + ₱7,500 = ₱25,000

Thus, Steve will receive a total of ₱25,000 as his commission.

a) Ana, the assistant manager of a clothing store earns a salary of ₱17,500 per
month. She also receives a 5% commission on the first ₱450,000 she sells, and
6% commission on sales above ₱450,000. If Ana sold ₱850,000 worth of clothes
last month, what was her total pay?

Solution: ₱450,000 × 0.05 = ₱22,500 (first commission)

₱850,000 – ₱450,000 = ₱400,000

₱400,000 × 0.06 = ₱24,000 (second commission)

₱22,500 + ₱24,000 = ₱46,500 (first + second commission)

₱46,500 + ₱17,500 = ₱64,000 (total commission plus salary)

Ana earned a total of ₱64,000 last month.

CASH VS. INSTALLMENT

a. Computing Commissions on Cash Basis – This type of commission is similar
to computing straight commissions.

Example 1:
Kevin works at Luna’s watch store. For every cash purchase of a watch, he gets 6.1%
commission. In a particular month, he was able to sell 10 watches costing ₱8,000 each.
How much was his total commission for such cash sales?
Solution:
Total Sales = ₱18,000/watch × 10 watches = ₱180,000 Cash
commission = ₱180,000 × 6.1% = 180,000 × 0.061 = 10,980
Thus, Kevin’s total commission is ₱10,980.
 b. Commission on Installment Basis – commission is computed based on partial
payments upon the agreed installment method.

Example 2:
At Luna’s store, some items are paid on installment basis through credit cards. Kevin
was able to sell 10 watches costing ₱18,000 each. Each transaction is payable in 6
months divided into 6 equal installments without interest. Kevin gets 2% commission
on the first month for each of the 10 watches. Commission decreases by 0.3% every
month thereafter and computed on the outstanding balance for the month. How much
commission does Mike receive on the first month? On the second month? Third? Fourth?
Fifth? Sixth month? At the end of installment period, how much will be his total
commission?

Solution:
First month commission: ₱18,000/watch × 10 watches × 0.02 = ₱3,600
Second month commission: ₱15,000/watch × 10 watches × (0.02 – 0.003)
= ₱2,550
Third month commission: ₱12,000/watch 10 watches (0.017 – 0.003)
=₱1,680
Fourth month commission: ₱9,000/watch 10 watches (0.014 – 0.003)
=₱990
Fifth month commission: ₱6,000/watch 10 watches (0.011 – 0.003)
=₱480
Sixth month commission: ₱3,000/watch 10 watches (0.008 – 0.003)
=₱150
His total commission for six months is:
₱2,550 + ₱1,680 + ₱990 + ₱480 + ₱150 = ₱9,450.

Note: The base price of the watch is subtracted by 3,000 for each month since it was
stated in the problem that the price is will be paid in 6 equal payments. Thus 18,000/6
= 3,000.

THE DOWN PAYMENT

Down payment is an initial payment made when something is bought on credit. The
down payment is a first payment that one makes when one buys something with an
agreement to pay the rest later.

How do we obtain the down payment?

Example#1:

When one purchases a car or any big item not through cash but installment terms,
normally, a certain down payment is required of the buyer. Car dealers normally require
a minimum down payment, which is usually 20% of the total cost of the vehicle
purchased. The interest on the remaining balance is then computed depending on the
number of years a buyer would want to amortize the remaining balance. If a car costs
₱1,000,000 and a minimum 20% down payment is required by the company, then the
buyer will have an initial cash out of ₱200,000; that is,
0.20 1,000,000 = 200,000. The remaining ₱800,000 will be amortized monthly and
the amount of monthly amortization depends on the number of years the buyer will want
to pay the loan. Normally, buyers prefer a 3-year or 5-year payment period. The lesser
the number of years, the lesser the total amount paid as interest to the loan. But with
this arrangement, the monthly amortization will be considerably higher than when one
chooses to pay the balance for longer number of years.

Example#2:

Companies selling houses or condo units lure buyers by stating that no down payment
is required but only a certain amount of reservation fee. The reservation fee paid is
deductible when the buyer decides to proceed with the purchase. Otherwise, it will be
forfeited in favor of the company. After the reservation fee has been paid, the buyer is
told to pay the monthly amortization. For instance, ₱10,000 per month for two years
without interest. At the end of two years, the remaining balance will now be subjected
to an interest either through in-house or bank financing.

GROSS BALANCE

This refers to the total amount of money a bank has on deposit before adjusting for
uncleared checks or deposits, as well as reserve requirements. That is, the book balance
is a measure of what the bank has on hand before adding or subtracting regulatory
obligations and items that will soon appear on its books. This is the term used by banks
to describe the amount of money available before any adjustments is made for deposits
in transit, checks that have not been cleared, and reserve requirements and interest
received from “float funds”.

Example:
A simple case of gross balance refers to what is readily available for you to use based
on your bank deposits. For example, a check amounting to Php5,000 that has been
deposited today may not be withdrawn the next day because it has not cleared yet. If
your bank passbook currently contains ₱30,000, you may not be able to withdraw the
whole amount yet because your gross balance is only ₱25,000 since your check has not
been cleared yet.

CURRENT INCREASED BALANCE

This refers to the total amount you have to pay that includes penalties or interest
incurred by unpaid balance from a loan or payment you are supposed to have made but
was not able to do so on time.

Example:
As of this month’s cut-off date, the current total amount due from your purchases using
your credit card is ₱99,386.59. The minimum required payment is 5% of the total
amount due. If you pay only the minimum required payment, a financing charge of 3.4%
of the remaining balance will be charged to the next bill. Assuming you refrain from
using your credit card on any of your purchases for the next 3 months and the financing
charge of 3.4% is applied every billing period, show your expected monthly bill for the
next 3 months.

Solution:
Given the current bill of ₱99,386.59, the minimum required payment is 0.05(99,386.59)
= ₱4,969.33. If only the minimum required payment is paid, then the remaining debt
balance is 99,386.59 – 4,969.33 = ₱94,417.26. Assuming there is no credit bill
transactions for the next 3 months and the only minimum required payment each
month is paid, the table below shows the monthly total amount due for each of the next
3 months.
 Time Total amount due for the month Minimum required
t(months) payment for the month
0 99,386.59 0.05(99,386.59)
= 4,969.33
1 (99,386.59 – 4,969.33) + .034(99,386.59 – 0.05(97,627.45)
4,969.33) = 4,881.37
= 94,417.26 + .034(94,417.26)
= 1.034(94,417.26)
=97,627.45
2 1.034(97,627.45 – 4,881.37) 0.05(95,899.45)
= 1.034(92,746.08) = 4,794.97
=95,899.45
3 1.034(95,899.45 – 4,794.97) 0.05(94,202.03)
= 1.034(91,104.48) = 4,710.10
= 94,202.03

Observe that for the next 3 months, a total of ₱14,386.44 has already been paid for the
credit card bills. However, only ₱5,184.56 (99,386.59 – 94,202.03) has been deducted
so far from the original debt of ₱99,386.59. Hence, every time we keep paying only the
required minimum payment, more money goes to interest payments rather than
payment of the actual debt.

From the above example, your minimum required payment of ₱4,969.33 serves as your
down payment for your loan of ₱99,386.59 leaving you with a balance of
₱94,417.26 at the start of the month. However, because there is a finance charge of
3.4%, if you are not able to pay for the next month, your current increased balance will
become ₱97,627.45

Good luck and God bless in your upcoming first quiz!