Understanding Elizabeth's Earnings: A Deep Dive into Gross Salary and Commissions

What are Elizabeth's gross earnings for the week if her salary is 296.00 and her commission from sales of 63,255 is 1%?

• A. 900.00
• B. 928.55
• C. 1,050.00
• D. 1,200.00

Answer: (B)

To determine Elizabeth's gross earnings for the week, you need to consider both her salary and her commission from sales. Elizabeth's salary is straightforward: she earns a fixed amount of $296.00 for the week. Next, we need to calculate her commission. She receives 1% of her total sales, which amounts to $63,255. To find the commission, multiply the sales amount by the commission rate: \[ Commission = 63,255 \times 0.01 = 632.55 \] Now, you combine her salary and her commission to find her total gross earnings: \[ Gross Earnings = Salary + Commission \] \[ Gross Earnings = 296.00 + 632.55 = 928.55 \] Thus, Elizabeth's total gross earnings for the week amount to $928.55. This calculation correctly incorporates both components of her compensation, resulting in the total earnings calculated.

Understanding how to calculate gross earnings can seem daunting at first glance, but it's actually a straightforward process when you break it down. Let's take a closer look at Elizabeth's earnings for the week—something that every AFC candidate should grasp—especially if you're gearing up for that big exam.

Elizabeth has a solid weekly salary of $296. That figure is clear-cut; it’s the fixed amount she’s guaranteed to bring home. Yet, her income doesn’t stop there. Like many roles in sales, she receives a commission based on her sales performance. In Elizabeth's case, she earns 1% on total sales of $63,255. Curious about how that impacts her paycheck? Let’s do the math.

First, we need to calculate her commission. So, what’s the formula? It’s simple: multiply her total sales by the commission rate. In Elizabeth's case, that would look like this:

[

Commission = 63,255 \times 0.01 = 632.55

]

Now, we’ve got her commission sitting comfortably at $632.55. You know what’s essential here? It’s not just the commission; it’s about how these figures combine to give her gross earnings. Sometimes people think of salary and commission as separate, but they’re both vital pieces of the puzzle.

To find Elizabeth’s total gross earnings, you'd add her salary to her commission:

[

Gross Earnings = Salary + Commission

]

[

Gross Earnings = 296.00 + 632.55 = 928.55

]

Voilà! Elizabeth's total gross earnings for the week amount to $928.55. It’s that straightforward! But why does this matter for you as a student preparing for the AFC? Understanding this simple yet critical calculation is part of mastering accounting fundamentals. Imagine you’re sitting in the exam room and run into a question just like this one. You wouldn’t want to freeze up, right?

Plus, let’s not forget that the concept of commission can vary across industries, and knowing how to calculate it can open doors to understanding performance incentives in the workplace. It’s a real-world skill that will benefit you not just during the exam but throughout your accounting career.

So, the next time you hear about earnings or commissions, remember Elizabeth’s story. Use it as a reference point to sharpen your skills and to reflect on how crucial this knowledge is in various job roles. Whether it’s an internship or a full-time position, solidifying your grasp on such calculations can set you apart from the pack. Keep practicing, because who knows when you’ll need this information? Aim to ace that AFC, but more importantly, aim for real-world application in the accounting field. You got this!