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Commission

Commission – definition and example, Grade 7 math glossary – Mathovore

Key takeaway: A commission is pay that a salesperson earns as a percent of the total value of the goods or services they sell.

Grade 77.RP.A.3Ratios, Rates and Percents

Definition of Commission

Definition

A commission is a payment based on how much someone sells. Real estate agents, car salespeople and many store employees earn one, sometimes on top of a base salary.

The pay is found by multiplying the total sales by a percent rate. If sales double, the pay doubles too. That makes it a proportional relationship: the rate is the constant that connects sales to earnings, and a slow month means a smaller paycheck. Some employers raise the rate once a seller passes a target, but the same multiplication applies to each portion.

Formula and notation

Change the rate to a decimal and multiply by the sales:

\[\text{commission} = \text{rate} \times \text{total sales}\]

With a base salary, \(\text{total pay} = \text{base salary} + \text{commission}\). To work backward, \(\text{total sales} = \frac{\text{pay}}{\text{rate}}\).

total sales$12,400x rate0.035commission$4343.5% of $12,400 = $434
Sales go in, the rate multiplies them, and the pay comes out.

Key facts

  • The rate is a percent of sales, so 3.5% is written 0.035 in the formula.
  • If a salary is also paid, add it to the sales earnings to get total pay.
  • Earnings are proportional to sales, so doubling the sales doubles the pay.
  • Working backward, sales equal the pay divided by the rate.

Commission example

Problem

Imani sells solar panels and earns 3.5% of everything she sells. In March she closes sales worth \$12,400. How much does she earn from these sales?

  1. Write 3.5% as a decimal: \(3.5\% = 0.035\).

  2. Multiply by the sales: \(0.035 \times 12400 = 434\).

  3. Check: 1% of 12,400 is 124, and \(3.5 \times 124 = 434\).

Imani’s commission for March is \$434.

Common mistake

Watch out

Imani turns 3.5% into 0.35 and finds \(0.35 \times 12400 = 4340\), so she expects \$4,340.

Why it is wrong

Moving the decimal point only one place gives 35%, not 3.5%. Dividing 3.5 by 100 moves it two places: 0.035. The correct amount is \$434, one tenth of her figure. A quick estimate warns of the slip: 3.5% is far less than 10%, and 10% of 12,400 is only 1,240, so a result of 4,340 cannot be right.

Related terms and lessons

Browse the glossary: A–Z list · Grade 7 vocabulary · Ratios, Rates and Percents

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