Calculating Currency Transactions Involving Commission

Instructor: Lucinda Stanley

Lucinda has taught business and information technology and has a PhD in Education.

Working on commission is a way to earn money based on your own efforts. In this lesson, learn what a commission is and how it is calculated using US currency examples.

Calculating Commissions

Have you ever gone in to buy a car and within minutes you have half a dozen sales people asking if you need some help, if you want to see anything in particular, or if you want to test drive that green Subaru you've been eyeing? Chances are those sales people are working on commission. Commission is simply being paid based on the value of the product you are selling. Sales people who work on commission are paid a percentage of the sale. Let's see how that works.

Formulas for Calculating Commission

There are a number of ways to calculate a commission, but the basic formula is:

Commission: Basic Formula

You can also use a proportion to calculate a sales commission:

Commission: Using Proportion

Here's another way to calculate commission:

Commission: Another Calculation Method

So, if a sales person is paid 3% commission (meaning he earns 3% of the value of the sale) and he sells something worth $45,000, he would earn $1,350. If he makes a sale of $65,000 at 3% commission, he would earn $1,950. The more they sell, the more money they make. In other words, the more effort they put into their job, the more money they can take home with them. Let's look at some practice problems with the formulas we've learned.

Practice Problem #1

Sarah Sells a Car!

Sarah is working for Best Car Deals dealership and earns 4% commission on sales that she makes. Joe has come in and wants to buy a nice little convertible for $17,000. The basic formula to calculate Sarah's commission is this:

Commission Rate x Total Sales

3% x 17,000

Using a proportion, we would set up the formula like this:

Calculating Commission Using Proportion

To do the calculation we would cross multiply the commission rate (3) times the sale value (17,000) and then divide by 100 (100 being the total percent).

(3 x 17,000) / 100

Remember following order of operations means anything in parentheses will be calculated first:

3 x 17000 = 51,000

Then we do the division:

51,000 / 100 = 510

Sarah would earn $510 on the sale to Joe. Let's try one more practice problem

Practice Problem #2

Scott Sells a House!

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