A property in Arizona sells for $400,000. If the agent earns 3% on the first $100,000 and 2.5% on the remainder, what is the total commission?
Audio Lesson
Duration: 2:57
Question & Answer
Review the question and all answer choices
$10,500
$10,000
$11,500
$12,000
Why is this correct?
First $100,000 × 3% = $3,000. Remaining $300,000 × 2.5% = $7,500. Total = $10,500.
Podcast Transcript
Full conversation between instructor and student
Instructor
Hey there! Today we're diving into a medium difficulty real estate math question, perfect for those who are about to take their AZ real estate license exam. Ready to tackle it?
Student
Absolutely, I'm all set. Let's hear it!
Instructor
Alright, here's the question: A property in Arizona sells for $400,000. The agent earns 3% on the first $100,000 and 2.5% on the remainder. What is the total commission?
Student
Oh, this one is a doozy. I can see how it might be tricky with the different percentages.
Instructor
Exactly, it tests your ability to apply tiered commission structures, which are common in the industry. Let's break it down. The first $100,000 is subject to a 3% commission, and the remaining $300,000 is subject to a 2.5% commission. Now, let's calculate it.
Student
So, the first $100,000 would earn the agent $3,000 (100,000 x 3%), and the next $300,000 would earn them $7,500 (300,000 x 2.5%). That adds up to $10,500.
Instructor
Perfect, that's the correct answer! The total commission is $10,500, so the answer is A. This question highlights the importance of correctly identifying the thresholds and applying the right rates to each portion of the sale.
Student
I see now, I was thinking of applying a flat 2.5% to the entire amount, which is a common mistake.
Instructor
Exactly, and that's why option B is incorrect. It doesn't take into account the tiered structure. Option C, which might add the two commission percentages and apply it to the full amount, is also a mistake. Option D might come from applying 3% to the full amount or incorrectly adding the percentages. Understanding the tiered nature of the commission structure is key.
Student
Got it. It's all about those thresholds!
Instructor
Absolutely. Now, let's remember this with a little memory technique. Picture a staircase with two steps. The first step, which is the first $100,000, is higher (3%), and the second step, the remaining $300,000, is slightly lower (2.5%). Just like climbing those steps, you calculate the commission for each portion separately.
Student
That's a great visual! I'll definitely use that to remember how to tackle tiered commission questions.
Instructor
Great! And for the exam, always remember to identify the thresholds and rates first, then calculate each portion separately before adding them together. Double-check your calculations, and you'll be golden.
Student
Thanks for the tips and the explanation. I feel more confident now!
Instructor
You're welcome! And remember, these types of questions are common, so practice them. Keep your focus sharp, and you'll do great on the exam. Keep up the good work!
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