Denim Company offers sales people the following commission structure, with commission being paid monthly:

Question

Denim Company offers sales people the following commission structure, with commission being paid monthly:

1.00% on the first $4,000 they sell,

3.00% on the next $3,000 they sell, and

4.50% thereafter on all sales they make.

Leah, a new sales representative, made sales of

$5,000 in her first month,

$8,000 in her second month, and

$7,200 in her third month.

a. What were her total commissions for the first three months?

b. What single commission rate would represent her total earnings throughout the first 3 months?

Answer 1

1st month: 1% on 4K plus 3% on 1K = $40 + $30 = $70

2nd month 1% on 4K + 3% of 3K + 4.5% on 1K = $40+$90+$45 = $175

3rd month 1% on 4K +3% on 3K + 4.5% on 0.2K = $40+$90+$9 = $139

total commissions = 70+175+139 = $384

384/(5K+8K+7.2K) = 384/20.2K = 1.9%