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?
Question & Answer
Review the question and all answer choices
$10,500
$10,000
$10,000 would result from applying a flat 2.5% commission to the entire $400,000 sale price ($400,000 × 0.025 = $10,000), which ignores the higher 3% rate on the first $100,000 tier and incorrectly treats the entire price as a single flat-rate commission.
$11,500
$11,500 does not result from any correct application of the stated commission tiers — it may arise from a calculation error such as applying 3% to $150,000 instead of $100,000, or from incorrectly splitting the price bands.
$12,000
$12,000 would result from applying a flat 3% commission to the entire $400,000 sale price ($400,000 × 0.03 = $12,000), which ignores the lower 2.5% rate that applies to the amount above $100,000 and overstates the commission by $1,500.
Why is this correct?
The calculation requires splitting the $400,000 sale price into two tiers: the first $100,000 earns 3% ($100,000 × 0.03 = $3,000), and the remaining $300,000 earns 2.5% ($300,000 × 0.025 = $7,500), producing a total commission of $3,000 + $7,500 = $10,500. This two-step tiered calculation correctly applies each rate only to its designated portion of the sale price, not to the entire price.
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