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Using the same schedule of a $1,000 base plus 3 percent on the first $50,000, 4 percent on the next $30,000, and 5 percent beyond $80,000, what is the total pay for a month with exactly $80,000 of sales?
A$2,700
B$3,700
C$4,700
D$4,200
Answer & Solution
Correct answer: B. $3,700
1. Sales of exactly $80,000 fill the first two bands and leave the third band empty.
2. The first band is $50,000 at 3 percent, which gives $1,500.
3. The second band is $30,000 at 4 percent, which gives $1,200.
4. Nothing is sold beyond $80,000, so the 5 percent band contributes zero.
5. Commission is $1,500 plus $1,200, which is $2,700.
6. Adding the $1,000 base salary gives total pay of $3,700.
7. Option A is the trap of reporting commission only, and option C is the total that would apply at $100,000 of sales instead.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 8 "Managing Human Resources and Labor Relations", section Types of Compensation or Pay_
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