A salesperson earns 5% on all sales between $200 and

Anandk, it's 5% on all sales between $200 and $600

Anand.. gotcha!! did same mistake

I consider this question stupid.
I have seen companies who give a different percentage rate for different levels of sales.

For Example at car dealership if a salesman sells 10 cars then the percentage will be 10 per car and if he sells 20 then percentage will be 15 and if he sells less then 10 then percentage will be 5. What do think the dealer will pay to his sales person if that sales person sells 12 cars?

Hmmm, what about a pen salesman whose commission is based on sales value. It could be very much possible that the salesman will not get any bonus until he sells 200$ worth of pens. Then from 200$-600$, he gets 5% and from sales more than 600$, he gets 8%. The car example comparison is not appropriate because the underlying good's unit is a luxury good for which the bonus scheme might be very different.

Answer is 36. I have seen Anandnk getting caught for the first time. Kudos Shubhangi for the cute good one......

Do you pay taxes? We get taxed the same way this salesperson gets paid.

This type of bonus structure is very common in sales and thus I don't think the question is "stupid", but a good example of something you might see on an actual GMAT.

hi Akamaibrah,

I do pay taxes. My friend earns $30000 as yearly pay and pays nothing in taxes. Another friend of mine earns $60,000 as yearly pay and pays $15000 in taxes at 25% tax rate because he falls in $35000 to 65000 bracket.
Isn't the problem given above same?

I'm glad you pay taxes. If so, then you should know that how much someone earns is insufficient information to calculate his/her taxes. What is important is what part of that income is taxable.

The point of my question is that once you get down to the "taxable" income figure, each dollar of this income is taxed according to where it lies on a scaled table of percentages. A person in a particular tax bracket only pays that percentage on income earned within that bracket, not his or her entire income.

I don't know what the real numbers are but something like first 7500 are not taxed, then 7500-15000 are taxed at 15% the 15001 to 23000 are taxed at 18% and so on. Hence, we have a scaled system similar to that of the salesperson's pay, where he make get a percentage commission on the first x items, then a different commission on anything in excess of x.

If you think about it, this is also why we have tax lookup tables -- it is not a straightforward calculation to figure out ones tax because a part of each person's income is taxed at different percentages.

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