Expert: Josh - 10/18/2009

Question
This problem from my real estate study guide is worded poorly.

" A salesperson's compensation is based upon the total commission paid to the broker.  The salesperson receives 30% of the first $2,500, 40% of any amount between $2,500 and $7,500, and 50% of any amount exceeding $7,500.  If a property sells for $234,500 and the broker's commission rate is 6.5%, what is the salespersons total compensation?"

Answer
Hi Jim,

This pretty much works in the same way as the tax system.

First, the commission earned by the broker has to be calculated. Let this be A.
Second, the compensation received by the salesman is computed from A, in a manner similar to progressive taxation which depends on the income bracket.

First, broker commission A = 234500 * (6.5/100)  = 15242.50.
Second, salesperson compensation consists of the sum of the following:
2500 * 0.30
(7500-2500) * 0.40
(15242.5-7500) * 0.50

We just need to add these up.

Cheers:)