Business
Income
is any form of inflow of funds that an individual receives. Can be in the form of investment income, salaries, profits, or dividends.
Single trade discount
is easy to calculate because we simply multiply the list price with the given trade discount.
Piecework
is work in which the employee is paid for each piece of quality item that he completes. The wages are paid on a piece-rate basis. Piece-rate is mainly
Semi-monthly
means every half month, or paid twice a month, usually every 15th and last days of the month; paid 24 times a year
Bi-weekly
means every other week, usually on a Friday; paid 26 times a year.
Bi-monthly
means every two months.
Commission and Salary
In certain cases, however, a sales employee that is given a basic salary earns commission on sales above a certain figure.
Rationale for Markdown
Prices are sometimes marked down due to many reasons: -To face stiff competition -To encourage purchases in bulk -To dispose off, old, obsolete, or damaged stocks -To close a line of merchandise (end of season sale)
Minimum Wage
Rate depends on the region. Based on a 40-hour work week or 8 hours per day. The daily 1 hour lunch break is mandatory; it is not included in the 8-hour work day, hence, it is not compensated.
Conversion of Salary
Sometimes, it is necessary to convert salaries on an annual basis into monthly basis, weekly to monthly, monthly to semi-monthly, etc. 1 year = 12 months = 24 semi-monthly = 6 bi-monthly 1 year = 52 weeks = 26 bi-weekly 1 month = 2 semi-monthly bi-monthly = every two months bi-weekly = every other week
End of Month Dating method
Start counting the days from the 1st day of the next month after the invoice is received.
Ordinary Dating Method
Start counting the days on the day after the date of the invoice
Receipt-of-Goods Dating Method
Start counting the days the day after the goods are received.
Cash discount
is a reduction of the amount due on an invoice to encourage prompt payment of the bill.
Receipt-of-Goods Dating Method
Used when the transportation of goods takes a long time, as in the case of long-distance overland shipments by rail or truck, or shipments by boat.
Cash discount
at the time of payment
Trade discount
at the time of purchase
trade discount
could either be a single discount or a series of discounts.
Plain Commission
- Computation of the commission makes use of the basic formula we learned, P = BR. - The commission is the percentage (P), the sales is the base (B), and the commission rate is the rate (R).
Transportation Allowance and Representation Allowance
- In certain cases, managers, and even salespersons are given transportation allowance, and/or representation allowance. - Just remember that any allowance given a person is in addition to the basic salary, commission, and override that he or she is entitled to. Let us take the following example:
Commissions and Overrides
- Salesmen, agents, and brokers are generally paid commissions as incentives for increasing a firm's sales. - Salesmen are either paid on a straight commission basis or on a salary plus commission basis.
End of Month Dating method
- Sometimes, the sales terms reads 2/10 n/30 E.O.M., where E.O.M. stands for "end of month". - This means you get a 2% discount if you pay within the first ten days of the next month. - You must pay the bill within the first 30 days of the next month or you start to incur interest charges.
Ordinary Dating Method
- This means that if payment is made within 10 days of the date of the invoice, a discount of 2% may be deducted from the net amount of the invoice. - Otherwise, payment of the net amount of the invoice is due within 30 days.
Commission on Sales in Installment Basis
- What we have discussed so far are commissions on cash basis, that is, for cash sales. - If the sales are on installment basis, companies do not give commission based on sales. -Rather, they give commission based on collection, that is, payment made by buyers.
List Price
- is the manufacturer's, distributor's, or retailer's quoted, published, or displayed price on which quantity, seasonal, or other discounts are computed. - Also called manufacturer's suggested retail price (MSRP).
Trade discount
-is a reduction from the list price granted to buyers. -Allowed or given for bulk purchase.
Overrides
For people who have people under them doing sales, overrides are given by their companies in addition to their basic salary. Product, sales or marketing managers earn overrides.
Overtime Pay
Given if an employee works for more than the required number of hours of work per day. The computation of overtime pay depends if the OT work happened on a regular work day, holiday, rest day, or at night (between 10 pm to 6 pm)
Premium Pay
Given on non-working days (rest days and special holidays)
Overtime Pay
If the OT took place on a regular work day - plus 25% of the hourly pay rate.
Why do manufacturers offer trade discounts to their customers?
1. Entice customers to buy 2. Improve goodwill 3. Higher consumer sales
THREE METHODS: CASH DISCOUNT
1. Ordinary Dating Method 2. End of Month Dating (EOM) 3. Receipt of Goods (ROG) Dating
Employee compensation can be of two kinds:
1. Salary 2. Wage
Salary
A fixed, regular payment normally paid monthly or every two weeks made by an employer to an employee for services rendered.
Wages
A fixed, regular payment usually paid on a daily or weekly basis made by an employer to an employee for manual or unskilled laborers.
Quota
A quota is a target number to be achieved, as in sales quota.
Salary
A salary is part of a compensation package that employers provide to employees in exchange for performing specified services.
Piece rate
A worker employed on a "piecework" basis is paid in proportion to the quantity of work he or she finishes.
Plain Commission
Most sales agents earn commissions only. They are not paid any salary. Therefore, they exert their best effort to increase their sales, because the more they sell, the more they earn.
Benefits
Additional privileges given to employees. Some benefits are mandatory, while others are not.
Commissions and Overrides
Agents and brokers are generally not employees of the firm and paid commissions only.
Night Shift Differential
An additional pay given to an employee if work is done between 10 pm to 6 am. The rate is additional 10% to the regular wage per hour of work rendered.
Hourly Rate
Many employees are paid on an hourly basis. To compute for the pay, we simply multiply the number of hours of work by the hourly rate.
Markup
Markup = Selling Price - Cost
Gross Profit
The amount of money a seller makes on a product when it sells it for more than cost.
Overhead Expenses
The costs of running a business, such as salaries, rent, supplies, utilities, and taxes, also called operating expenses .
Markdown
The difference between the regular selling price of an item and its sale price, or the amount of the discount.
Markdown rate
The discount on an item expressed as a percent of its regular selling price, such as 20 percent.
Minimum Wage
The lowest allowable rate of compensation that is applicable per region, province, and industry sector. Current minimum wage in Metro Manila is P537.00.
Net-Profit Rate
The net profit on an item expressed as a percent of the selling price. It represents the percentage of profit from business operations after you've deducted operating expenses, interest expense, etc. If you are running a business and plan to expand, it's essential that you understand your company's net profit rate.
Net Profit
The profit of a company after operating expenses and all other charges including taxes, interest and depreciation have been deducted from total revenue. Also called net earnings or net income. If expenses and charges exceed revenue, the company incurs a net loss.
Receipt-of-Goods dating Method
When the abbreviation R.O.G. (receipt of goods) appears in the terms of payment, as in 2/10, n/30 R.O.G., the last day for taking the discount is the stipulated number of days after the date the merchandise is received, rather than the invoice date.
Employee compensation
which is the umbrella term for salaries and wages, is defined by the National Statistical Coordination Board (NCSB), as remuneration in cash and in kind paid to employees at regular intervals for time of work or work done.