Question

Choose the method of pay that would result in the most earnings for one month on sales of $73,620.
a.
Straight commission of 6% on all sales.
b.
Monthly salary of $3,000 plus 2% commission on all sales.
c.
Graduated commission of 4% on the first $50,000 in sales and 9% on anything over that.
d.
Graduated commission of 5% on the first $35,000 in sales and 7% on anything over that.

Answer 1

Compute each monthly pay:

a. 6% of $73,620 = 0.06(73,620) = $4,417.20
b. $3,000 + 2% of $73,620 = 3,000 + 0.02(73,620) = 3,000 + 1,472.40 = $4,472.40
c. 4% on first $50,000 + 9% on remainder = 0.04(50,000) + 0.09(23,620) = 2,000 + 2,125.80 = $4,125.80
d. 5% on first $35,000 + 7% on remainder = 0.05(35,000) + 0.07(38,620) = 1,750 + 2,703.40 = $4,453.40

Highest is option b: $4,472.40.