CHAPTER XXIV COMMISSION AND BROKERAGE 366. Importance of Commission and Brokerage. There are very many agents and brokers working on commission. There are real estate agents, insurance agents. There are general agents, or brokers who will sell or buy almost anything on commission. There are financial brokers who buy and sell stocks and bonds and other securities. There are few applications of percentage to business which are of more general use than commission and brokerage. 367. Agent or Broker, Principal. An agent, commission merchant, or broker transacts business for the account of another. The business transacted is usually selling or buying. The individual or company for whom the agent buys or sells is called the principal. 368. Commission or Brokerage. The agent receives a compensation for his work, which is usually a certain per cent of the amount involved in the transaction. This is called his commission or brokerage. 369. Shipment, Consignment. A lot of goods sent to an agent to be sold is called a shipment by the person who sends the goods, and a consignment by the agent who receives it. 370. Consignor, Consignee. The person sending the goods is called the shipper, or consignor, and the one receiving them is called the consignee. 371. Account Sales. When goods are sold by an agent, he renders a statement to his principal, which is called an account sales. The account sales contains a full account of the gross amount of the sale, the commission charged, and all incidental expenses. 372. Account Purchase. When goods are bought by an agent, he renders a statement to his principal, which is called an account purchase. The account purchase contains a full account of the amount paid, the commission charged, and all incidental expenses. 373. Gross and Net Proceeds. The amount received by the agent for goods sold is called gross proceeds. This amount less the commission and other charges is called net proceeds. 374. Gross and Net Price. The amount which an agent actually pays for goods is called the net price, or net cost; and the amount after commission and other expenses connected with the purchase are added is called the gross price or gross cost. 375. Guaranty. An agent sometimes guarantees the collection of bills for goods sold by him, or he guarantees the quality of goods bought. For this service a certain amount called guaranty is charged. An example will make these definitions clear. Arthur Ward ships 50 bales of cotton to his agent, R. A. White, of Galveston, Texas, to be sold on commission. White sells the cotton for $3750. He deducts $37.50 as his commission and $18.75 for guaranteeing collection and remits $3693.75 to Mr. Ward. In this case, Ward is the principal; White, the agent, commission merchant, or broker; $3750 is the gross proceeds; $37.50, the commission or brokerage; $18.75, the guarantee; and $3693.75 the net proceeds. Ward speaks of the cotton as a shipment, and White speaks of it as a consignment. Ward is the shipper or consignor, and White is the consignee. D. L. Thompson of St. Paul requests Martin A. Reyerson Co. of Chicago to purchase for his account certain structural iron. The iron is bought for $9500, brokerage $95. = In this case Thompson is the principal; Reyerson, the agent; $9500, the net price; $95, the commission; and $9500 + $95 = $9595, the gross price. 376. Commission and Brokerage Compared with Percentage. Problems on commission and brokerage are problems in percentage. The sales price, or purchase price, is the base. The rate commission or brokerage is the rate. The net proceeds is the difference. 377. To Find the Commission. To find the commission when the rate and the price are given. Solution. This is the same problem as finding the percentage when the base and the rate are given. See page 258. 378. To Find Net Proceeds. Problems. To find the net proceeds when the selling price and the rate of commission are given. Solution. This is the same problem as finding the difference when the base and the rate are given. Thus, if the selling price is $200, and the rate commission is 2%, the net proceeds is $200 - $4 = $196. ORAL EXERCISES Find the net proceeds in each of the following: Find the net proceeds in each of the following: 13. A real estate agent sold a house for $7500. How much did he remit to his principal if he deducted a commission of 3%? 14. A cotton broker sold 85 bales of cotton averaging 490 pounds at 14 cents a pound. How much did he remit to his principal after deducting a commission of %? 15. An agent sold a second-hand automobile for $940. What were the net proceeds from the sale if the agent deducted a commission of 7%? 379. To Find the Gross Price. To find the total sales or purchases when rate and commission are given. Solution. This is the same problem as finding the base when the rate and the percentage are given. See page 262. Find the total sales in each of the following: 7. The average rate of commission on sales charged by a real estate agent is 4 per cent. What must be his total sales in a year to obtain a gross income of $18,000? 380. To Find Net Price in Buying. To find the net price, the gross price and the rate commission being given. Solution. This is the same problem as finding the base when the rate and the amount are given. See page 264. Thus, if $5000 is sent to an agent to invest in grain at a commission of 14%, the amount actually invested in grain is $5000 ÷ 1.0175 WRITTEN EXERCISES Find the net price in each of the following: = $4914.00. |