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Difficulty: MediumWages, Salaries, and Commissions

Determine the total gross earnings for the month based on the given compensation structure.

Answer:During the month of October, a medical equipment consultant recorded total sales of $45,000\$45,000. His compensation package includes a guaranteed monthly base salary of $1,200\$1,200. On top of this base, he earns a 5%5\% commission on the first $20,000\$20,000 of his sales, and an 8%8\% commission on all sales volume beyond that initial $20,000\$20,000. Based on these figures, the consultant's total gross pay for October is $【4200】\$【4200】.

Answer

The consultant's total gross pay is $4,200.
The total gross pay is found by isolating the sales into two tiers: the first 20,000earnsa520,000 earns a 5% commission ( 1,000) and the remaining 25,000earnsan825,000 earns an 8% commission ( 2,000). Adding these two commissions to the 1,200basesalaryyieldsatotalgrosspayof1,200 base salary yields a total gross pay of 4,200.

Step-by-Step Solution

1
Calculate the commission earned on the first tier of sales.
$20,000×0.05=$1,000\$20,000 \times 0.05 = \$1,000
The consultant earns a 5% commission on the initial $20,000 of sales.
2
Determine the amount of sales that qualify for the second commission tier.
$45,000−$20,000=$25,000\$45,000 - \$20,000 = \$25,000
The higher commission rate only applies to the sales volume exceeding the first $20,000.
3
Calculate the commission earned on the second tier of sales.
$25,000×0.08=$2,000\$25,000 \times 0.08 = \$2,000
The consultant earns an 8% commission on the remaining $25,000 of sales.
4
Sum the base salary and both commission amounts to find the total gross pay.
$1,200+$1,000+$2,000=$4,200\$1,200 + \$1,000 + \$2,000 = \$4,200
Total earnings are the sum of the guaranteed salary and all commissions earned.

Key Concept

Calculating total earnings involving a base salary and a multi-tiered commission structure.
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Topics

Wages, Salaries, and Commissions

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