4.3 Brokerage:

We have studied so far selling and buying of products. Let us study the providing of services. One such  service provider is Real Estate Agency: The agency gets requests from those  who want to buy  lands, sites, houses, shops. Or those who require shops/houses on rent.. He is also approached by people who want to sell sites, houses, shops and others who are looking for tenants. The real estate agency acts as ‘middle man’ between ‘buyers’ and ‘sellers’.

They charge ‘brokerage’ or ‘commission’ for providing the services.

Same is the case with agencies who deal with buying and selling of used cars.

You also must have heard about marriage bureaus.  They provide services in finding matches for brides and bridegrooms.

Another service which is popular in major cities is ‘Placement services’

They collect details about people who seek employments in companies. These agencies help the candidates in getting suitable employment in companies. For their service they normally charge 10% of employee’s salary. This is paid by companies  and not by job seekers.

The amount (fee) received by the agency for its services are called ‘commission’ or ‘brokerage’.

It is not that this type of business is carried out only by an agency always. An individual can also carry out this type of business

An individual who acts as a ‘middleman’ between a buyer and seller is called a broker’ or ‘commission agent.

The commission or brokerage need not always be a fixed % of sale price; it can also be a fixed amount as in the example:

‘One month rent is paid as brokerage for identifying premises for a person who is in need of a house/shop  on rent’

Generally, Brokerage is paid by purchaser, Commission is paid by seller. Therefore

Net amount paid by purchaser = Sale price+brokerage

Net amount received by seller = Sale price - commission

Like in case of discount, we have similar formula:

Commission (Brokerage) = Commission%*Selling price/100

From this formula we can arrive at formulae for

Commission % = Commission*100 /Selling price

Selling Price = Commission*100/ Commission %

4.3 Problem 1 :  A farmer purchased a cow through a broker whose selling price is Rs 10,000. If brokerage paid is 2 ½ % find the brokerage and cost of cow,

Solution:

Brokerage = Commission%*Selling price/100 = 2.5*10000/100 = Rs 250

Cost of cow = Selling price + brokerage = 10000+250 = Rs 10,250

4.3 Problem 2:    An agency pays 15% commission to a paper distributor. The price of each news paper is Rs 3. If he sells 50 copies of news paper every day, find how much commission he receives in a month and also net amount received by the Agency

Solution:

Price of each news paper = Rs 3.

Sale price for a day = Number copies sold in day * price of Cost of news paper  =50*3 = Rs 150

Sale price for a year = Number of days* Sale price for a day = 30*150 = 450 Rs

Commission = Commission%*Selling price/100 = 15*450/100 = 67.5 Rs.

Net amount received by agency = selling price – commission = 450 -67.5 = 382.5 Rs

4.3 Problem 3:  The Price  of 8th standard mathematics book  is Rs. 15.75. A book seller sells 1200 books and pays Rs 17,860.50 to the book publisher after   deducting his commission.  Find the commission rate.

Solution:

Since we are given total commission, we need to know the total sale price of books.

The total sale price of books = Number of Books * Price = 1200*15.75 =18900

Commission = Sale price –Amount paid to the Publisher = 18900-17860.5 = 1039.5

Commission % = Commission*100 /Selling price = 1039.5*100/18900 = 5.5%

Verification:

Commission for one book can be calculated as

Commission = Commission%*Selling price/100 = 5.5*15.75/100  = .86625

Commission for 1200 books = Number of Books * Commission for one book = 1200*.86625 = 1039.5

Amount paid to the publisher = Sale price – Commission = 18900 – 1039.5 = 17860.5 which is  as given in the problem.

4.3 Problem 4 :  A farmer sold his old tractor for Rs.68,000 with the help of an agent. If the commission paid by the farmer is Rs 2550. Find

rate of commission, and the net  Amount received  by the  farmer.

Solution:

Commission % = Commission*100 /Selling price = 2550*100/68000 = 3.75%

Net amount received by farmer = Sale price – Commission = 68000-2550 = Rs65, 450

Verification:

Commission = Commission%*Selling price/100 = 3.75*68000/100 = Rs 2550 which is as given in the problem.

4.3 Problem 5 :  A farmer paid Rs.75 commission for selling vegetables. If the rate of commission is 2.5% find the amount got by farmer after paying commission

Solution:

Selling Price = Commission*100/ Commission % = 75*100/2.5 = Rs 3000.

Amount received by farmer = Selling price – commission = 3000-75 = Rs 2925

Verification:

Commission = Commission%*Selling price/100 = 2.5*3000/100 = Rs 75 which is as given in the problem.

4.3 Problem 6 :  A company pays Rs 7000 salary  per month and  also 5% commission to an employee for selling articles. If the employee receives Rs 9500 in one month, find the value of articles sold by the employee.

Solution:

Since employee receives salary and also commission we need to find out first his commission.

Commission = Amount received – Salary = 9500-7000 = 2500

Selling Price = Commission*100/ Commission % = 2500*100/5 = Rs 50,000.

Verification:

Commission = Commission%*Selling price/100 =5*50000/100 = Rs 2500

Amount received by the employee = Salary + commission = Rs 7000+2500 = Rs.9500 which is as given in the problem.

4.3 Summary of learning

 No Points to remember 1 Commission (Brokerage) = Commission%*Selling price/100 2 Commission % = Commission*100 /Selling  price 3 Selling Price = Commission*100/ Commission %