Question

. A computer software salesman earns a base salary of $28,000 per year and a graduated commission. For all yearly sales from $0 to $5000, he receives a commission of 10%; for all yearly sales from $5000 to $10,000, he receives a commission of 15%; for all yearly sales from $10,000 to $50,000, he receives a commission of 25%; and for all yearly sales above $50,000, he receives a commission of 30%. The salesman expects to make $80,000 in sales this year, and wants to calculate his projected yearly earnings. (8 points: Part I - 2 points; Part II - 2 points; Part III - 2 points; Part IV - 1 point; Part V - 1 point) Part I: How much will the salesman earn in commission on the first $5000 of his sales? Part II: How much will the salesman earn in commission on his sales from $5000 to $10,000? Part III: How much will the salesman earn in commission on his sales from $10,000 to $50,000? Part IV: How much will the salesman earn in commission on his sales above $50,000? Part V: What are the salesman's projected yearly earnings?

Answer 1

1. $500
2. $750
3. $10,000
4. $9,000
5. $20,250

Explanation:

I. He earns 10% on sales up to $5000, so on the first $5000, he earns ...

0.10 × $5000 = $500

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II. On sales above $5000 and less than $10,000 he earns 15%. On the next $5000, he earns ...

0.15 × ($10,000 -5,000) = 0.15 × $5000 = $750

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III. On sales above $10,000 and less than $50,000, he earns 25%. On the next $40,000, he earns ...

0.25 × ($50,000 -10,000) = 0.25 × $40,000 = $10,000

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IV. On sales above $50,000, he earns $30. On the next $30,000, he earns ...

0.30 × ($80,000 -50,000) = 0.30 × $30,000 = $9,000

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V. On sales of $80,000, the salesman will expect to earn a commission of ...

$500 +750 +10,000 +9,000 = $20,250

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Comment on graduated commission calculation

The calculation can be simplified by using a different equation in each range:

< 5000 --- 0.10×sales

5000-10,000 --- 0.15×sales -250

10,000-50,000 --- 0.25×sales -1250

50,000+ --- 0.30×sales -3750