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Question

Difficulty: MediumWages, Salaries, and Commissions

An independent contractor installs smart home systems. He earns a base rate of $18.50\$18.50 per hour for a standard 4040-hour workweek. For any overtime hours worked beyond 4040 hours, he earns time-and-a-half. He also receives a 5%5\% commission on all equipment sales he makes. If he worked 4848 hours this week and sold $3,200\$3,200 worth of equipment, what are his total gross earnings for the week?

  1. A
    \$382.00
  2. \$1,122.00Answer
  3. C
    \$2,562.00
  4. D
    \$4,322.00

Answer

The total gross earnings for the week are $1,122.00\$1,122.00.
The correct answer accurately accounts for all three payment streams. The base pay for 40 hours is 40×$18.50=$740.0040 \times \$18.50 = \$740.00. The overtime pay for the 8 extra hours is calculated at time-and-a-half (18.50×1.5=$27.75/hr18.50 \times 1.5 = \$27.75/hr), which yields 8×$27.75=$222.008 \times \$27.75 = \$222.00. The 5% commission on $3,200\$3,200 in sales is 0.05×3,200=$160.000.05 \times 3,200 = \$160.00. Adding these together ($740+$222+$160\$740 + \$222 + \$160) results in $1,122.00\$1,122.00.

Step-by-Step Solution

1
Calculate the standard base pay for 4040 hours.
40×$18.50=$740.0040 \times \$18.50 = \$740.00
The contractor earns a fixed hourly rate for the first 40 hours worked.
2
Calculate the number of overtime hours and the overtime rate.
Overtime hours: 48−40=848 - 40 = 8. Overtime rate: $18.50×1.5=$27.75\$18.50 \times 1.5 = \$27.75.
Overtime is paid at 'time-and-a-half' for any hours worked beyond the standard 40 hours.
3
Calculate the total overtime pay.
8×$27.75=$222.008 \times \$27.75 = \$222.00
Multiply the overtime hours by the higher overtime pay rate.
4
Calculate the commission earned on equipment sales.
0.05×$3,200=$160.000.05 \times \$3,200 = \$160.00
The commission is 5% (or 0.05) of the total sales volume.
5
Sum all three components to find the total gross earnings.
$740.00+$222.00+$160.00=$1,122.00\$740.00 + \$222.00 + \$160.00 = \$1,122.00
Gross earnings are the sum of base pay, overtime pay, and commission before any deductions.

Key Concept

Calculating Gross Pay with Overtime and Commission
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Topics

Wages, Salaries, and Commissions

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