Examkin

Question

Difficulty: Very hardWages, Salaries, and Commissions

A medical equipment representative earns a base salary of $800 per week plus a tiered commission on weekly sales. The commission structure is as follows:

- 3% on the first 10,000ofsales−510,000 of sales - 5% on the next 15,000 of sales
- 7.5% on any sales exceeding $25,000

During a specific week, the representative's total sales are 32,000.Additionally,therepresentativereceivesa32,000. Additionally, the representative receives a 150 bonus for exceeding 30,000insales,butmustpay30,000 in sales, but must pay 275 out-of-pocket for weekly travel expenses which are deducted from their gross earnings. What are the representative's net earnings for the week?

  1. A
    $1,450
  2. $2,250Answer
  3. C
    $3,075
  4. D
    $6,975

Answer

$2,250
The net earnings are correctly found by evaluating the sales across three tiers: 3% on the first 10,000(10,000 ( 300), 5% on the next 15,000(15,000 ( 750), and 7.5% on the remaining 7,000(7,000 ( 525). Adding this 1,575commissiontothe1,575 commission to the 800 base salary and 150bonusyieldsgrossearningsof150 bonus yields gross earnings of 2,525. Subtracting the 275inexpensesresultsinafinalnetpayof275 in expenses results in a final net pay of 2,250.

Step-by-Step Solution

1
Calculate the commission on the first tier (0to0 to 10,000).
10,000×0.03=10,000 \times 0.03 = 300
The first $10,000 of sales earns a 3% commission.
2
Calculate the commission on the second tier (10,000to10,000 to 25,000).
15,000×0.05=15,000 \times 0.05 = 750
The next $15,000 of sales earns a 5% commission.
3
Calculate the commission on the third tier (sales exceeding $25,000).
Total sales (32,000)−32,000) - 25,000 = 7,000.7,000. 7,000 \times 0.075 = $525
The remaining sales amount above $25,000 earns a 7.5% commission.
4
Determine total commission.
300+300 + 750 + 525=525 = 1,575
Total commission is the sum of earnings from all three tiers.
5
Calculate net earnings.
800(base)+800 (base) + 1,575 (commission) + 150(bonus)−150 (bonus) - 275 (expenses) = $2,250
Net earnings equal base salary plus total commission plus bonuses minus deductions.

Key Concept

Calculating tiered commissions, bonuses, and deductions to determine net earnings.
Rate this question

Topics

Wages, Salaries, and Commissions

More questions from this topic