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Question

Difficulty: MediumWages, Salaries, and Commissions

Sarah works as a wholesale medical supplier. She is compensated with a fixed weekly base pay of $750\$750. In addition to her base pay, she receives an 8%8\% commission on the portion of her weekly sales that exceeds a $5,000\$5,000 quota. If her total sales for the week amount to $12,500\$12,500, what is her total gross earnings for the week?

  1. A
    $600\$600
  2. B
    $810\$810
  3. $1,350\$1,350Answer
  4. D
    $1,750\$1,750

Answer

$1,350\$1,350
To find the total gross earnings, you must first identify the sales amount subject to commission by subtracting the quota from the total sales ($12,500−$5,000=$7,500\$12,500 - \$5,000 = \$7,500). Next, find the 8%8\% commission on that amount (0.08×7,500=$6000.08 \times 7,500 = \$600). Finally, add the commission to the fixed base pay ($750+$600=$1,350\$750 + \$600 = \$1,350).

Step-by-Step Solution

1
Determine the amount of sales eligible for commission.
$12,500−$5,000=$7,500\$12,500 - \$5,000 = \$7,500
The commission is only applied to the portion of sales that exceeds the $5,000 quota.
2
Calculate the commission earned.
8% of $7,500=0.08×7,500=$6008\% \text{ of } \$7,500 = 0.08 \times 7,500 = \$600
Multiply the commissionable sales by the commission rate (expressed as a decimal) to find the extra earnings.
3
Calculate the total gross earnings.
$750+$600=$1,350\$750 + \$600 = \$1,350
Add the base pay to the earned commission to find the total gross pay for the week.

Key Concept

Calculating gross pay involving a base salary and a commission with a sales quota.
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Topics

Wages, Salaries, and Commissions

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