Question

The earnings of two employees are given below:

Employee A: 5% commission on all sales.
Employee B: 3% commission on the first $60,000 and 6% on anything over $60,000.
How much more does a straight commission employee make than the graduated commission employee for sales of $100,000?

A) $1,000.
B) $1,200.
C) $800.
D) $1,400.

Answer 1

Employee A, with a straight commission, earns $800 more than Employee B, with a graduated commission, on sales of $100,000. This difference is calculated by comparing 5% commission on all sales for Employee A against 3% on the first $60,000 and 6% beyond that for Employee B.

Step-by-step explanation:

To calculate the difference between the earnings of Employee A and Employee B when sales are $100,000, we first need to determine how much each employee makes. Employee A earns a straight commission of 5% on all sales. Employee B earns a graduated commission of 3% on the first $60,000 and 6% on anything over that.

For Employee A's earnings: 5% of $100,000 = 0.05 × $100,000 = $5,000.

For Employee B's earnings, calculate the commission for the first $60,000 and then for the remaining $40,000: 3% of $60,000 = 0.03 × $60,000 = $1,800. Plus 6% of $40,000 = 0.06 × $40,000 = $2,400. Adding these together gives us $1,800 + $2,400 = $4,200.

Now, take the difference between Employee A's and Employee B's earnings: $5,000 - $4,200 = $800.

Thus, for sales of $100,000, Employee A makes $800 more than Employee B, which corresponds to option C)