Business Mathematics

Commissions and Overrides

Nida C. Flores
Teacher III

May 28, 2021

 Commissions and Overrides

Overview
Salesmen , agents and brokers are generally paid commissions, as
incentives for increasing a firm’s sales. Salesmen are employees of the
firm either paid on a straight commission basis or on a salary plus
commission basis. Agents and brokers are generally not employees of
the form and paid commissions only. Marketing and or product
managers are generally paid overrides on the sales of people under
them. Override, also applies when a different commission rate is
applied if a certain target is reached. For example , the commission
rate may be 2% of sales, but retroactively changes to 4% if the sales
agent attains a certain quarterly sales goal. In this case, an override is
an incentive for sales agent to reach his or her goal .
 Commissions and Overrides

Lesson Objectives
At the end of the lesson, the students must be able to:

• Illustrate the different types of commissions

ABM_BM11BS-IIa-11
• Compute commissions on cash basis and commission on
installment basis
• ABM_BM11BS-IIa-12
 Commissions and Overrides

Specific Learning Objectives

At the end of the lesson, the students are expected to:

1. Differentiate commission from override;

2. compute for commission earned on a particular cash sale;
3. Compute for commission earned on an installment sale; and
4. Solve for gross earnings involving salary, commission, and overrides
 Commissions and Overrides

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Pre-assessment
Luis works as a salesman for Iba Merchandising. He is paid a basic
salary of P 8,500.00 per month plus 4% commission on all his sales. For the
current month, he made total sales of P 45,000.00 Find his:
a. Commission
b. Gross earnings
 Commissions and Overrides

Commission is a fee paid to person who makes a sale. The commission is

usually a percent of the selling price. The percent is called the Commission
Rate

There are 3 different types of commission. These are:

1. Straight Commission
2. Salary Plus Commission
3. Graduated Commission
 Commissions and Overrides

Straight Commission
It is a type of commission where a person is paid a percentage of his/her sales
only.
Most sales agent s earn commission only. They are not paid any salary.
Computation of the commission makes use of the basic formula, P= BR. The
commission is the percentage(P). The sales is the base(B), and the commission
rate is the rate(R)

Example.
Karen Quiambao is a sales agent for the High-Rise Realty. She is paid based on commission only.
She is given a 2% commission on her sales. For the current month , her sales was P1, 035,000.00.
Her commission (which is also her gross earnings) would be:

Commission = P 1,035,000 x 2 %
= P 1,035,000 x 0.02 %
= P 20,700
 Commissions and Overrides
Salary plus Commission
It is a type of commission where a person gets paid a salary and a percentage of
his/her sales. Generally , if a person is employed by a firm as a salesman, he or
she is given a basic salary in addition to the commission he or she is given on
his or her sales. His /or her gross earnings are equal to:
Gross Earnings = Basic Salary + Commissions

Example.
Karen Quiambao is an employee of High-Rise Realty with basic salary of P 10,000.00.
She is given a 2% commission on her sales. For the current month , her sales was P1, 035,000.00.
Her commission (which is also her gross earnings) would be:
Gross Earnings = Basic Salary + Commissions
=P10,000 + P 1,035,000 x 2 %
=P10,000 + 1,035,000 x 0.02 %
= P10,000+ P 20,700
= P30,700
 Commissions and Overrides
Salary plus Commission
It is a type of commission where a person gets paid a salary and a percentage of
his/her sales. Generally , if a person is employed by a firm as a salesman, he or
she is given a basic salary in addition to the commission he or she is given on
his or her sales. His /or her gross earnings are equal to:
Gross Earnings = Basic Salary + Commissions

Example.
Karen Quiambao is an employee of High-Rise Realty with basic salary of P 10,000.00.
She is given a 2% commission on her sales. For the current month , her sales was P1, 035,000.00.
Her commission (which is also her gross earnings) would be:
Gross Earnings = Basic Salary + Commissions
=P10,000 + P 1,035,000 x 2 %
=P10,000 + 1,035,000 x 0.02 %
= P10,000+ P 20,700
= P30,700
 Commissions and Overrides
Salary plus Commission
In certain cases, however, a sales employee that is given a basic salary earns
commission on sales above a certain figure.
Example.
Erwin Flores is a sales representative earning a basic salary of P 18,000 a month
plus 3% commission on his sales exceeding his quota of P 15,000. Assume he made a
total sales of P 36,000.00 for the current month. Find his gross earnings.
Given: Basic salary = P18,000
3% Commission on sales above P 15,000(Sales-Quota)
Total Sales = P36,000
Find: Gross Earnings
Solution: Gross Earnings = Basic Salary + Commissions
= P18,000 + 3% (Sales - Quota)
= P18,000 + 3% (P36,000-P15,000)
= P18,000 + 3% (P21,000)
= P18,000 + P630
= P18,630
 Commissions and Overrides
Graduated Commission
It is a type of commission where the percentage changes based on how much
someone sells. Most of the companies encourage their agents to sell more goods.
In certain cases, a sales employee is paid a basic salary and a graduated
commission based on sales above quota.
Example.
Camille Cruz is paid is a basic salary of P 9, 400 a month plus commission on all
sales above her quota of P 30,000 a month according to the following schedule:
1% on first P20,000
2% on next P20,000
3% on sales above quota exceeding the foregoing P40,000
Compute for her gross earnings if she sells a total of P 75,360.00 for the past month.
Given: Monthly salary = P9,400
Sales quota = P30,000
Sales = P75,360
Commission :
1% on first P20,000
2% on next P20,000
3% on sales above quota exceeding the foregoing P40,000
Find : Gross earnings
 Commissions and Overrides
Graduated Commission

Solution. Let us first solve for the commission

Total Sales = P75,360.00

Less quota = 30,000.00
Sales subject to commission = P 45,360.00
First 20,000x 1 % = P 200.00
Second 20,000 x 2 % = 400.00
Balance 5,360 x 3% = 160.80
Total Commission = P 760.80
Basic Salary = P 9,400.00
Gross earnings = P 10,160.80
 Commissions and Overrides
Overrides

For people who have people under them doing the sales, overrides are given by
their companies in addition to their basic salary. Product managers and sales or
marketing managers earn overrides

Example.
John Cruz is a product manager with five sales representatives under him. The company
gives him annual salary of P 126,000.00; commission of 5% on his own sales; and an
override of ½ % on his men’s sales. Find his gross earnings for the month if his total sales
is P365,500 with his men able to sell a total of P 1, 548, 263 for the month.

Given:
Annual salary = P 126,000
His sales = P 365,500
His men’s sales = P 1,548,263
His commission= 5% of his sales
His override = % of his men’s sales

Find: Gross Earnings of John Cruz

 Commissions and Overrides
Override Commission

Solution.
Commission = 5%x his own sales
= 5% x P365,500
= P18,275
Override = % x his men’s sales
= 0.005 x P 1,548,263
=P 7,741.32
Basic salary =
=
= P10,500.00

Gross earnings = P 36,516.00

 Commissions and Overrides
Transportation Allowance and Representation Allowance

In certain cases, managers, and even salespersons are given

transportation allowance and/or representation allowance. Any given allowance
to a person is added to the basic salary, commission, and override that he or she
is entitled to

Example.
Patrick Jimenez is a marketing manager. He earns a basic salary of P 12,500.00 per month.
He earns a 3% commission on his own sales and a 1% override on the sales of his men.
In addition, he is granted a transportation/ representation allowance of P 1,000 per month.
For the current month, his men made a total sales of P 250,000.00. His gross earnings
would be:
Gross earnings = Basic pay + Commission + Override + Allowance
= P12,500 + (3%)(P140,000) + (1%)(P250,000) + P1000
= P12,500 + P4,200 + P2,500 + P1,000
= P 20,200
 Commissions and Overrides
Commission on Sales in Installment Basis

If the sales are on installment basis, companies do not give commission

based on sales. Rather they are given commission based on collection, that is,
payment made by buyers.

Example.
Assuming a sale of P 120,000.00 is paid in a monthly installments of P10,000.00,
the commission rate is 3%.
Given: Total Sales = P120,000.00
Payment Form = Installment
Period = monthly
Commission rate = 3%
Find: Monthly commission
Solution:
Monthly commission = 3% x P10,000
= 0.03 x P10,000
= P300
 Commissions and Overrides
Evaluation:

Jason is a sales manager receiving a monthly salary of P 18,000.00,

A commission of 5% on his sales, and a monthly transportation allowance of P
5,000.00. He is also given an override of 1% on his men’s sales. For the moth of
August, Jason sold a total of P 110,000.00. His men sold a total of P380500.00.
Compute for his gross earnings.
 Commissions and Overrides

Thanks for
Listening