BUSINESS

MATHEMATICS
FOR SENIOR HIGH SCHOOL

2nd QUARTER
Study Guide

PREPARED BY:

Vincent J. Ramirez, LPT

DAVAO DOCTORS COLLEGE, INC.
Senior High School Program - FACULTY
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Table of Contents
Cover Page
K to 12: Specialized Subject Curriculum Guide ......................................................................... i
Table of Contents ......................................................................................................................... iii

Module 1: Buying & Selling

Lesson One: Markup, Markdown, & Gross Margin ....................................................................1
Lesson Two: Single Trade Discount & Discount Series ..............................................................4
Lesson Three: Profit, Loss, & Break-even ...................................................................................6
Lesson Four: Types of Commission...........................................................................................10
Lesson Five: Interests .................................................................................................................12
Lesson Six: Mortgage & Amortization ......................................................................................17

Module 2: Salaries & Wages

Lesson One: Salaries, Wage, Income, & Benefits .....................................................................19
Lesson Two: Gross & Net Earnings ...........................................................................................21
Lesson Three: Taxable & Non-Taxable Compensation & Benefits ..........................................24
Lesson Four: Standard Deductions ............................................................................................30

Grading system
Written Work 25%
Performance Task 45%
Quarterly Examination 30%
TOTAL 100%
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Subject : Business Mathematics for Senior High School

Chapter Title : Buying & Selling
Lesson : Markup, Markdown, and Gross Margin
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Define markup and markdown;
• Compute for the markup and the markdown;
• Differentiate markup gross margin; and
• Explain how gross margin is used in sales.
______________________________________________________________________________

An important principle in retail business is the proper pricing of its merchandise. Wrong
pricing may lead to small profit or heavy loss. The retailer must add an additional amount called
the markup to its original price to cover its business and to provide a profit. Businessmen are
interested in calculating how much profit they gain if they sell a product that they bought at a lower
price.

Before we proceed further, we will identify the following variables as:

Mu – markup
Md – markdown
Mo – original price
r – rate
S – selling price
Mg – gross margin

For example, if you bought a lot for ₱800,000 and you want to sell it at ₱200,000 higher
than the original price, then you must sell the lot at ₱1 million. In other words, the price must
increase by ₱200,000. The P200,000 additional cost is called the markup, which is also
occasionally called markon. Markup – can be defined as the amount that is added to the original
cost of an item to arrive at a selling price.

Markup rate – may be thought of as the ratio of the markup to the original price. The
𝐌𝐮
following is the formula for computing the markup rate: 𝐫 = × 𝟏𝟎𝟎% where r is the markup
𝐌𝐨
rate, Mu is the markup, and Mo is the original price. In the problem given above you can now
𝟐𝟎𝟎,𝟎𝟎𝟎
compute the markup rate as follows: 𝐫 = × 𝟏𝟎𝟎% = 𝟐𝟓%.
𝟖𝟎𝟎,𝟎𝟎𝟎

You can also form the following important formula for the selling price (S) of an item:
𝐒 = 𝐌𝐨 + 𝐌𝐮 ,so with the given problem above, it will be, 𝑆 = 800,000 + 200,000 = 1,000,000

If an item is bought at an original price Mo and sold at a higher price S, then the markup
Mu and the markup rate r can be calculated using the formula: 𝐌𝐮 = 𝑺 − 𝐌𝐨

If an item is bought at an original price Mo and sold at a lower selling price S, then we
called that markdown Md, and the markdown rate r can be computed using the following formulas:
𝐌𝐝
𝐌𝐝 = 𝐌𝐨 − 𝑺 and 𝐫 = × 𝟏𝟎𝟎%
𝐌𝐨
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Determining the Markup and the Markup Rate

Example 1: In 2018 Bareg bought a residential lot for P350,000. He sells the property at its present
market value, which is P600,000. How much is the markup? What is the markup rate?

𝑀𝑢 = 𝑆 − 𝑀𝑜
𝑀𝑢 = 600,000 − 350,000
𝑀𝑢 = 250,000 markup

Calculating the Selling Price given the Markup Rate

Example 2: A certain shop buys and sells foreign currencies. Suppose it buys US dollar at P44,
and then sells the dollar at a 2.3% markup rate. What is the selling price of a US dollar? Round off
your answer to the nearest centavo.

𝑆 = 𝑀𝑜 (1 + 𝑟)
𝑆 = 44 (1 + 0.023)
𝑆 = 45.01 selling price

Determining the Markdown Rate

Example 3: The price of an item, which was originally sold at P425, was reduces to P357. What is
the markdown rate?

𝑀𝑑 = 𝑀𝑜 − 𝑆
𝑀𝑑 = 425 − 357
𝑀𝑑 = 68
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Determining the Selling Price given the Markdown Rate

Example 4: Bareg purchased a laptop for P22,000. After a few months, he purchased a new laptop
and decided to sell his older lapt0p at a price that is 40% lower than its original price. How much
should he sell his older laptop?

𝑆 = 𝑀𝑜 (1 − 𝑟)
𝑆 = 22,000 (1 − 0.4)
𝑆 = 13,200

Determining the Gross Margin and the Gross Margin Rate

Example 5: Amlong spent P2.4 million to construct a house. He then sold the house at P3 million.
How much was the gross margin? What was the gross margin rate?

𝑀𝑔 = 𝑆 − 𝑀𝑜
𝑀𝑔 = 3,000,000 − 2,400,000
𝑀𝑔 = 600,000 gross margin

Calculating the Selling Price

Example 6: Consider again the problem in Example 5. It was mentioned that Amlong spent P2.4
million to construct the house. If he wants to have a gross margin rate of 25%, how much should
he sell the house?

S = Mo / 1 – r
S = 2,400,000 / 1 – 0.25
S = 3,200,000

Problem Solving involving Markup and Gross Margin

Example 7: Pilong was requested by his manager to calculate the selling price of an item that costs
P600,000 to produce if their company will apply:
20% markup rate; or
20% gross margin rate

𝑆 = 𝑀𝑜 (1 + 𝑟)
𝑆 = 600,000 (1 + 0.2)
𝑆 = 720,00 selling price based on markup rate

S = Mo / 1 – r
S = 600,000 / 1 – 0.2
S = 750,000 selling price based on gross margin rate
 4

Subject : Business Mathematics for Senior High School

Chapter Title : Buying & Selling
Lesson : Selling Trade Discount and Discount Series
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Compute single trade discounts and discount series
• Differentiate profit from loss; and
• Illustrate how to earn profit and avoid loss in a given transaction.
______________________________________________________________________________

To encourage customers to purchase products, companies often offer discounts on the

prices. Discount is a percentage that is deducted from the original price. This is similar to
markdown. There are two types of discounts. The first type is the single trade discount. Single
trade discount is a one-time discount that is given to customers when they buy a product.

We can use the following techniques when determining which formula should be used
when one of the variables is missing:
Where:
Mo – original price
r – rate
D – discount
S – selling price

Determining the Discount

Example 1: A refrigerator that original costs P12,990 is on sale at 20% off. If you but it, how much
will you save?

𝐷 = 𝑟 𝑥 𝑀𝑜
𝐷 = 0.2 𝑥 12,990
𝐷 = 2,598

Determining the Original Price

Example 2: If you saved P4,200 from purchasing a flat screen TV set that is on sale at 7% off,
what was the original price of the TV set?
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Determining the Discount and the Selling Price

Example 3: A DVD, which originally cost P600, is marked 25% off. How much is the discount?
What is the selling price?

𝐷 = 𝑟 𝑥 𝑀𝑜 = 0.25 𝑥 600 = 150

𝑆 = 𝑀𝑜 − 𝐷 = 600 − 150 = 450

The second type of discount is the discount series. Discount series means that multiple
discounts are applied successively on the same item.

Problem: Suppose another supplier of slippers offers the retailer a 20 / 12 discount series, which
means that the retailer gets 20% discount on the original price amount, and an additional 12%
discount on the resulting discounted amount. It is important to note that a 20 / 12 discount series
is not the same as a 32% single trade discount.

To show you:

Let’s say the retailer will purchase P50,000 worth of slippers. What will be the selling price if we
apply 32% single trade discount or 20 / 12 discount series?
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Subject : Business Mathematics for Senior High School

Chapter Title : Buying & Selling
Lesson : Profit, Loss, and Break-even
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Differentiate profit from loss;
• Calculate profit or loss;
• Explain how to avoid loss in a given transaction;
• Define break-even; and
• Determine break-even point.
______________________________________________________________________________

Business are typically established in order to gain profit, which is often referred to as the
bottom line of every business. Profit is usually associated with revenue and expenses. Revenue is
the amount of money that a company receives for its goods and services. Expenses is the amount
of money that the company spends to either produce its goods or perform its services.
As we all know: 𝑷 = 𝑹 – 𝑬

Determining the Profit

Example 1: Amlong made 100pieces of doughnuts and sold them at P6 each. It costs him P4 to
make one piece of doughnut. If all doughnuts will be sold, how much will be his profit?
𝐸 = (4) (100) = 400
𝑅 = (6) (100) = 600
𝑃 = 𝑅 − 𝐸 = 600 − 400 = 200

Determining the Loss

Example 2: On a certain day, Bareg made 100 pieces of pancake to sell. It costs him P4.50 to make
one piece of pancake. He was able to sell only 72 pieces at P6 each. How much was his loss?
𝐸 = (4.50) (100) = 450
𝑅 = (6) (72) = 432
𝑃 = 𝑅 − 𝐸 = 432 − 450 = −18

To avoid or offset the loss, Bareg may sell the remining doughnuts at a lower price or do
certain promotional strategies like a “buy-1-take-1” offer. If he will be able to earn exactly P18
(which is the amount of the loss) from any of those activities, then the difference between the total
revenue and the total expenses will become zero. When that happens, we can say that he was
already able to break-even.
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Break-even point – is the point when the total cost of expenses and revenues are equal. It is the
point when there is neither a profit nor a loss.

Determining the Break-Even Point

Example 3: It costs Anna P4 to make one doughnut. She made 100 pieces and plans to sell them
at P5 each. How many pieces must she be able to sell in order to reach break-even point?
𝐸 = (4) (100) = 400
𝑅 = 5𝑥
𝑅=𝐸
5𝑥 = 400
𝑥 = 80

Forming an Expression for the Total Cost of Expenses and Total Revenue
Example 4: Pilong manufactures pens for a living. It costs him P22.50 to produce each pen. To
reach his target market, he also spends P27,000 for advertisements. Suppose Pilong sells x pieces
of pens at P30 each. Write an expression that represents total cost of expenses and total revenue.
𝐸 = 22.50𝑥 + 27,000
𝑅 = 30𝑥

Determining the Break-Even Point

Example 6: Pilong plans to sell siomai around his neighborhood. He estimates that it will cost him
P2.50 to make a piece of siomai. He also plans to buy a cart worth P2,700. Suppose he will sell
the siomai at P4 each.
First, write the equation
𝐸 = 2.50𝑥 + 2,700
𝑅 = 4𝑥

Second use the equation to determine the break-even point

𝑅=𝐸
4𝑥 = 2.50𝑥 + 2,700
4𝑥 − 2.50𝑥 = 2,700
1.5𝑥 = 2,700
𝑥 = 1,800
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Since we already have the value of x=1,800 we can now proceed to substitute this
𝐸 = 2.50𝑥 + 2,700 = 2.50(1,800) + 2,700 = 7,200
𝑅 = 4𝑥 = 4(1,800) = 7,200
The resulting value means that if Pilong sells 1,800 pieces of siomai, the cost of expenses and the
revenue are both equal to P7,200. This is the break-even point.

Problem Solving Involving Profit, Revenue, and Expenses

Example 7: Amlong sells burgers for a living. The cost for making each burger is P60. He wants
to know the relationship between the selling price that he should set and the number of burgers
that he needs to sell in order to earn a certain profit.
Conditions:
• Write an equation that relates his desired profit (P) to the selling price of each burgers that
he needs to sell.
• If he sells 100 burgers and his desired profit is P600, what should be the selling of each
burger?
• If the selling price of each burger is P80 and his desired profit is P1,000, how many burgers
should he sell?

Solution and Answer:

Suppose we let “x” as the number of burgers that Amlong needs to sell, and “y” as the selling price
of each burger.

1. The cost for making each burger is P60; so, to make the x burgers, the cost of expenses E is;
𝐸 = 60𝑥
Also, at a selling price of y pesos per burger, his revenue R when he sells x burgers is: 𝑅 = 𝑥𝑦
Recall the following formula that involves profit, revenue, and expenses: 𝑃 = 𝑅 − 𝐸
By substituting the equivalent expressions for E and R that we have obtained, the equation above
will become: 𝑃 = 𝑥𝑦 − 60𝑥

We now have a formula that relates his desired profit (P) to the selling price (y) of each burger and
the number of burgers (x) that he needs to sell.

2. It was given that x=100 and P=P600. By substituting these values to the equation that we
obtained in item (1), and then solving for y (which is the selling price of each burger), we will have
the following:

𝑃 = 𝑥𝑦 − 60𝑥
600 = 100𝑦 − 60(100)
600 = 100𝑦 − 6,000
600 + 6,000 = 100𝑦
100𝑦 = 6,600
𝑦 = 66

Thus, he should set the selling price at P66 per burger.

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3. It was given that y=P80 and P=P1,000. By substituting these values into the equation that we
obtained in item (1), and then solving for x (which is the number of burgers), we will have the
following:

𝑃 = 𝑥𝑦 − 60𝑥
1,000 = 80𝑥 − 60𝑥
1,000 = 20𝑥
20𝑥 = 1,000
𝑥 = 50

Therefore, he should sell 50 burgers.

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Subject : Business Mathematics for Senior High School

Chapter Title : Buying & Selling
Lesson : Types of Commission
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Illustrate the different types of commissions;
• Compute commissions on a cash basis and on installment basis; and
• Solve problems involving commissions.
______________________________________________________________________________

A commission is a fee that a business pays to a salesperson (agent) in exchange for his
services in either facilitating, supervising, or completing a sale. The commission may be based on
a flat arrangement or as a percentage of the revenue generated by a salesperson. In other words,
commission (renumeration) is a form of payment to an agent for services rendered.
We can use the following techniques when determining which formula should be used
when one of the variables is missing: C=commission, r=rate, and S=sales

Three different types of commission:

1. Straight Commission, also called (revenue commission) – a commission based on a

percentage of sales only.

Example 1: Mike receives 20% commission on the appliances he sells. If he sells a TV for
PhP7,000, a refrigerator for PhP12,000, and a heater for PhP 1,500, how much does Mike make in
commission?

Solution:
Total sales = PhP7,000 + PhP12,000 + PhP1,500 = PhP20,500
Commission = PhP20,500 x 20% = PhP 20,500 x 0.2 = PhP4,100
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2. Salary plus Commission – a commission in which a salesperson gets his basic salary and
a percentage of whatever sales he makes.

Example 2: Mike decides to work for another company that will pay him PhP2,000 per week and
10% commission on sales above PhP20,000 for the week. If he sold goods worth PhP26,000, what
is his gross pay (salary plus commission)?

Solution:
Amount of goods sold minus salary of PhP20,000 = PhP26,000 – PhP20,000 = PhP6,000
His commission will be PhP6,000 x 10% = PhP6,000 x 0.1 = PhP600
Therefore, his gross pay for the week is PhP2,000 + PhP600 = PhP2,600

3. Graduated Commission – a commission, which varies according to how much sales, is

made.

Example 3:
Mike works for a company that pays him 2% on the first PhP 20,000 sold, 3% on the next PhP
30,000 sold and 5% on all sales beyond PhP50,000. What is his gross pay if he sells PhP 60,000?

Solution:
First commission share = PhP20,000 x 2% = PhP20,000 x 0.02 = PhP400
Second commission = PhP30,000 x 3% = +30,000 x 0.03 = PhP900
Third commission = (PhP60,000 – PhP50,000) x 5% = PhP10,000 x 0.05 = PhP500
Therefore, his gross pay is PhP400 + PhP900 + PhP500 = PhP1,800

Note that this type of commission is lucrative for high achievers.

Commission on Installment Basis

Example 4: At ABC Gadget Store, some items are paid on installment basis through credit cards.
Mike was able to sell 10 cellphones costing PhP18,000 each. Each transaction is payable in 6
months equally divided into 6 equal installments without interest. Mike gets 2% commission on
the first month for each of the 10 cell phones. Commission decreases by 0.30% every month
thereafter and computed on the outstanding balance for the month. How much commission does
Mike receive on the first month? On the second month? On the third month? On the fourth month?
On the fifth month? On the sixth month? At the end of installment period, how much will be his
total commission?

Solution:

First month commission: PhP18,000/cellphone x 10 cellphones x 0.02 = PhP3,600

Second month commission: PhP15,000/cellphone x 10 cellphones x (0.02 – 0.003) = PhP2,550
Third month commission: PhP12,000/cellphone x 10 cellphones x (0.017 – 0.003) = PhP1,680
Fourth month commission: PhP9,000/cellphone x 10 cellphones x (0.014 – 0 .003) = PhP990
Fifth month commission: PhP6,000/cellphones x 10 cellphones x (0.011 – 0.003) = PhP480
Sixth month commission: PhP3,000/cellphone x 10 cellphones x (0.008 – 0.003) = PhP150
His total commission for six months is PhP9,450.
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Subject : Business Mathematics for Senior High School

Chapter Title : Buying & Selling
Lesson : Interests
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Illustrate the different types of commissions;
• Compute commissions on a cash basis and on installment basis; and
• Solve problems involving commissions.
______________________________________________________________________________

Interest is defined as an amount that is paid for the use of another party’s money. It is a
percentage of a certain amount called the principal amount.

In this lesson, we will identify the following as:

I = Interest
R = rate
P = principal
A = future value

Formula: 𝐼 =𝑟𝑥𝑃

We can use the following techniques when determining which formula should be used
when one of the variables is missing:

I=rxP

r=I/P

P=I/r

Finding the Interest

Example 1: Pilong invested P50,000 in an institution that offers an interest rate of 3% per year.
How much will he earn in a year?

𝐼 = 𝑟 𝑥 𝑃 = (0.03) (50,000) = 1,500

Future value – the obtained when the principal amount (P) and the interest (I) are added.

𝐴 = 𝑃 + 𝐼 = 50,000 + 1,500
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Finding the Interest Rate

Example 2: Amlong invested P8,000 in a certain company. When his investment reached the
maturity date, he received a total amount of P9,000.

How much did he gain? 𝐼 = 𝐴 − 𝑃 = 9,000 − 8,000 = 1,000

What was the interest rate?

Determining the Principal Amount

Example 3: Bareg invested in a bank that offers an interest rate of 10% per year. If he earned an
interest of P13,200 after a year, how much was Bareg’s investment?

There are types of interest and one of these is the simple interest. Simple Interest is an
interest that is computed only on the principal amount over a certain period.

We can use the following techniques when determining which formula should be used when one
of the variables is missing: I – Interest, P – Principal, r – rate, t – years/time.

Determining the Interest

Example 4: Amlong invests P250,000 in his friend’s company. His investment will earn a simple
interest rate of 5% per year. How much interest will he earn after 5 years?

𝐼 = 𝑃𝑟𝑡 = (250,000) (0.05) (5) = 62,500

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Determining the Future Value of an Investment

Example 5: Suppose you invested P50,000 in a company that gives 15% simple interest per year.

How much will be your account after 3 years?

𝐴 = 50,000[1 + (0.15) (3)]

𝐴 = 50,000(1 + 0.45)
𝐴 = 72,500

How much will be the total interest after 3 years?

𝐼 = 72,500 − 50,000
𝐼 = 22,500

Determining the Future Value of an Investment

Example 6: Amlong invested P200,000 in a bank that offers a 5% simple interest per year.

How much will be his money after 5 years?

𝐴 = 𝑃 (1 + 𝑟𝑡)
𝐴 = 200,000[1 + (0.15) (3)]
𝐴 = 250,000

How much will be the total interest after 5 years?

𝐼=𝐴−𝑃
𝐼 = 250,000 − 200,000
𝐼 = 50,000

Determining the Interest Rate

Example 7: After 5 years, Pilong earned a simple interest of P90,000 from a P300,000 investment.
What is the annual interest rate of the said investment?
 15

Determining the Principal Amount

Example 8: Determine the principal amount that you need to invest at a simple annual interest of
8% to have a total amount of P446,400 at the end of 3 years.

Another type of interest is the compound interest. Compound Interest is an interest that
is computed on the principal amount and on any interest that is accumulated during the period of
the transaction.

Determining the Future Value based on Yearly Compounded Interest

Example 9: The Barge Corporation invests P50,000,000 in a bank that offers an annual interest of
6%, compounded yearly. How much will be the future value of his investment after 10 years?

At = P (1 + r) t
At = 50,000,000(1 + 0.06)10
At = 89,542,384.83

General Formula in Calculating the

Future Value Based on
Compounded Interest

There are cases when interest is compounded, not on a yearly basis. Refer to the following
periods that are commonly used as basis for compounding interests and the corresponding values
of n
 16

Determining the Future Value based on Compounded Interest

Example 10: Suppose you invest P50,000 at a 15% interest rate, compounded semi-annually.
Determine the future value of your investment after 3 years.

Determining the Future Value based on Compounded Interest

Example 11: A Philippine bank learned that Bareg Corporation is planning to invest P50,000,000
in a foreign bank. So, the Philippine bank convinced the corporation to invest in them instead.
They offered the corporation an interest rate of 6%, compounded quarterly, for 10 years.
Approximately how much will be the future value of the corporation’s investment if they will
accept the offer of the Philippine bank?
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Subject : Business Mathematics for Senior High School

Chapter Title : Buying & Selling
Lesson : Mortgage and Amortization
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Illustrate how interest is computed and applied in mortgage, amortization,
services/utilities, deposits and loans.
______________________________________________________________________________

Mortgage can be defined as an agreement by which a debtor pays the lender (usually a
financial institution like bank) for a certain property over a period of time. In most contexts,
however, the term mortgage can also refer to the loan itself. Sometimes it is called the principal
amount of loan.

Amortization the amount that you need to pay based on the agreed upon schedule. This
maybe thought of as a process of dividing the value of a loan by paying a certain fixed amount
periodically.

General Formula in Calculating the Periodic Payment for a Mortgage

Where:
P – principal amount
r – interest rate
n – number of payments per year
t – total number of years during the which the mortgage will be paid
PM – Monthly/periodic payment for a mortgage

Determining the Monthly Payment for a Mortgage

Example 1: Suppose you want to buy a house that costs ₱1,000,000. You give a down payment of
₱200,000, and then you loan the remaining ₱800,000 from a bank. Your agreement with the bank
is that you will pay for the mortgage on a monthly basis for 10 years and that the bank will charge
3% interest rate, compounded monthly, on your loan. Determine the amount of your monthly
payment.
 18

Determining the Monthly Payment for a Mortgage

Example 1, continuation. Compute for the future value and the Interest.
 19

Subject : Business Mathematics for Senior High School

Chapter Title : Salaries and Wages
Lesson : Salary, Wage, Income, and Benefits
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Define salary, wage, income, and benefits; and
• Compute for the salary and wage.
______________________________________________________________________________

Salary is the compensation usually quoted annually or monthly for an employee. Wage,
on the other hand, is compensation quoted in an hourly or daily rate for an employee. Salary earners
usually get paid every 15 days (bi-monthly) while wage earners usually get paid either weekly or
sometimes even monthly, at their employer's convenience.
Salary earners are not paid less if they work for only a fraction of the required number of
hours and they are also not paid for working overtime while wage earners are under the “no work,
no pay policy”, means they are only paid the actual number of hours or days that they worked.
Art. 103. Time of payment. “Wages shall be paid at least once every two (2) weeks or
twice a month at intervals not exceeding sixteen (16) days. If on account of force majeure or
circumstances beyond the employer’s control, payment of wages on or within the time herein
provided cannot be made, the employer shall pay the wages immediately after such force majeure
or circumstances have ceased. No employer shall make payment with less frequency than once a
month. The payment of wages of employees engaged to perform a task which cannot be completed
in two (2) weeks shall be subject to the following conditions, in the absence of a collective
bargaining agreement or arbitration award: That payments are made at intervals not exceeding
sixteen (16) days, in proportion to the amount of work completed; That final settlement is made
upon completion of the work.” - (Art. 143, P.D. 442, also known as the Labor Code of the
Philippines)

Example 1: Computing for the Monthly Salary

Amlong works as an employee in a rural bank. I f he earns P360,000 in a year, how much is his
monthly salary?

Answer:
360,000 / 12 = 30,000

Formula for Calculating the Total Wage: W = nR, where n – number of hours and R – hourly
rate

Example 2: Computing for the Total Wage

Bareg works in a tutorial center that pays him P75 an hour. He works 6 hours a day on weekdays
and 4 hours every Saturday. He rests from work on Sundays. How much is Bareg’s weekly wage?

Answer:
W = nR
W = (34)(75)
W = 2,550
 20

Income is the total amount that people earn from their employment, businesses, investments, and
the professional services that they render. Income is money that an individual receives in exchange
for providing a good/service or through
investing capital.

Some sources of income:

1. Farmers, fishermen and vendors earn income by providing goods such as crops, fish and
vegetables, respectively.
2. Individuals may earn income by investing their capital in stocks, mutual funds or bank deposits.

Example 3: Calculating the Income

A teacher receives a monthly salary of P8,000. She also works as a tutor for 3 hours every Saturday.
If she paid P150 an hour for her tutoring services, how much is her total monthly income? Assume
that there are 4 Saturdays in a month?

Answer:
P150 x 3 x 4 = P1,800
P8,000 + 1,800 = P9,800 is her total income.

Example 4: Calculating the Income

Amlong works as a waiter in 3R’s Café. He works 8 hours a day and receives an hourly wage of
P60. Amlong is required to work 6 days in a week but during a certain week, he was absent for 2
days. How much was his total income that week?

Answer:
W = nR = 60 x 8 = 480

Since Amlong was absent for 2 days,

480 x 4 = 1,920, income received by Amlong that week.

Benefit is employee compensation given by an employer on top of the basic salary/wage. Note
that benefits may come in the form of cash or in kind.

Examples:
1. Cash Benefits: 13th month pay, bonuses, rice subsidy, transportation allowance
2. Non-cash benefits: SSS/GSIS, Pag-ibig, PhilHealth

Example 5: Problem Solving Involving Salary and Benefits

Suppose company A offers you a monthly salary of P30,000. However, the workplace is far from
where you live; so, you are planning to rent a house near it. The rent for the house that you are
considering costs P5,000 a month. On the other hand, company B offers you a monthly salary of
only P27,000 but provides a free accommodation near your workplace. Based on the given
information, which company is offering a better compensation and benefits package.

Answer:
Company B is offering a better compensation and benefits package.
Your income of P27,000 with Company B will not be affected by any month rent. Unlike Company
A that offers P30,000 monthly salary, it will be reduced to 25,000 (30,000 – 5,000) considering
the cost of renting a house.
 21

Subject : Business Mathematics for Senior High School

Chapter Title : Salaries and Wages
Lesson : Gross and Net Earnings
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Compute the gross and net earnings;
• Differentiate gross earnings and net earnings; and
• Enumerate the benefits of a wage earner.
______________________________________________________________________________

Income may also be derived from commissions, bonuses, royalties, ad other types of additional
compensation like; overtime pay, premium pay; holiday pay; and nigh shift differential.

Gross earnings – the total amount that people earn for performing a specific job during specific
period. The gross income of an individual refers to the total amount he/she earned before
deductions are made. Other adjustments may be payment for loans, etc.

Examples:
a. A teacher who gets a basic monthly salary of PhP20,000 and a living allowance of
PhP2,000 per month has an annual gross income of (20,000 x 12) + (2,000 x 12)
=PhP264,000.
b. A policeman who gets a basic salary of PhP25,000 per month, a living allowance of
PhP2,500 per month and a hazard pay of PhP12,000 per year has an annual gross income
of (25,000 x 12) + (2,500 x 12) + 12,000= PhP342,000.
c. A university professor who has a basic monthly salary of PhP80,000, a living allowance of
PHP2,000 per month, who also has an investment of PhP500,000 which earns an interest
of 6% per year has an annual gross income of (80,000 x 12) + (2,000 x 12) + (500,000 x
0.06) = PhP1,014,000.
d. A minimum wage earner in Metro Manila is paid PhP481 for an 8-hour workday. If he
works for 22 days in one month, then he will have a monthly gross income of 481 x 22 =
PhP10,582.

Net earnings – the resulting amount after the deductions had been applied on the gross earnings.
The net income of an individual is the difference between his/her gross income and deductions.
Example of deductions applicable are income tax, SSS or GSIS contributions, PhilHealth and Pag-
ibig contributions. The deductions can be a fixed amount or a percentage of the basic salary.

Examples:
a. A teacher who gets a basic monthly salary of PhP20,000 and a living allowance of
PhP2,000 per month has an annual gross income of (20,000 x 12) + (2,000 x 12) =
PhP264,000. Suppose this teacher has to pay every year PhP22,500 for income tax,
PhP4,500 for PhilHealth, PhP1,200 for Pag-ibig and PhP6,975.60 for SSS contributions,
then his annual net income is 264,000 – (22,500 + 4,500 + 1,200 + 6,975.60)
=PhP228,824.40.
b. A policeman who gets a basic salary of PhP25,000 per month, a living allowance of
PhP2,500 per month and a hazard pay of PhP12,000 per year has an annual gross income
of (25,000 12) + (2,500 12) + 12,000= PhP342,000. Suppose this policeman has to pay
annually PhP25,000 for income tax, PhP4,500 for Philhealth, PhP1,200 for Pag-ibig and
 22

PhP27,000 for GSIS contributions, then his net annual income is 342,000 – (25,000 + 4,500
+ 1,200 +27,000) = PhP284,000.
c. A university professor who receives a basic monthly salary of PhP80,000, a living
allowance of PhP2,000 per month, and has an investment of PhP500,000 which earns an
interest of 6% per year has an annual gross income of (80,000 12) + (2,000 12) + (500,000
0.06) =PhP1,014,000. Suppose this university professor has to pay each year PhP245,880
for income tax, PhP12,000 for Philhealth, PhP1,200 for Pag-ibig and PhP86,400 for GSIS
contributions, then his net annual income is 1,014,000 – (245,880 + 12,000 +1,200 +
86,400) = PhP668,520.
d. A minimum wage earner in Metro Manila is paid PhP481 for an 8-hour workday. If he
works for 22 days in one month, then he will have a monthly gross income of 481 22 =
PhP10,582. A minimum wage earner is exempted from paying income tax. Suppose his
deductions per month are PhP100 for Pag-ibig, PhP200 for PhilHealth and PhP363.30 for
SSS then his net monthly income is 10,582 – (100 + 200 + 363.30) =PhP9,918.70.

Example 1: Calculating the Annual Gross Earnings

Pilong is an area manager in J&S Mart. He receives a monthly salary of P25,000. He also owns a
bond that has a face value of P200,000 and that earns at an annual simple interest rate of 6%. How
much is his gross earnings?

Answer:

Yearly Salary = 12(25,000) = 300,000

Earnings from Investment = (0.06) (200,000) = 12,000
Yearly Gross earnings = 300,000 + 12,000 = 312,000

Example 2: Calculating the Weekly Gross Earnings

Bareg works as part-time tutor in RCUBED Tutorial and Review Center and is paid on a weekly
basis. His hourly rate is P75 for grades 1 to 6 students, and P100 for grades 7 to 10 students. The
table shows Bareg’s schedule in tutoring students during a certain week.

Compute for her gross earnings that week.

 23

Bareg works as part-time tutor in RCUBED Tutorial and Review Center and is paid on a weekly
basis. His hourly rate is P75 for grades 1 to 6 students, and P100 for grades 7 to 10 students. The
table shows Bareg’s schedule in tutoring students during a certain week.

Weekly Gross Earnings = 1,575 + 1,100 = 2,675.

Example 3: Calculating the Monthly Gross Earnings

As sales agent, Amlong earns a basic monthly salary of P22,000 plus a 12% commission on his
total monthly sales. His total sales in a particular month was P30,000. In the same month, Amlong
worked during 2 holidays. His employer entitles an employee twice the daily rate if the employee
works during a holiday. How much was the total amount of his gross earnings then? Assume that
there are 22 working days that month.

Daily Rate = 22,000 / 22 = 1,000

Extra Pay for the 2 holidays = 2(1,000) = 2,000 x 2 = 4,000
Commission = (0.12)(30,000) = 3,600
Gross Earnings = 22,000 + 4,000 + 3,600 = 29,600

Example 4: Calculating the Net Earnings

An employee has a monthly salary of P10,000. His legal deductions are the following: P363 for
the SSS premium, P125 for PhilHealth, P200 for Pag-IBIG fund, and P500 for the income tax.
How much is his net earnings in a month?

Deductions (d) = 363 + 125 + 200 + 500 = 1,188

Net earnings (N) = G – d = 10,000 – 1,188 = 8,812

 24

Subject : Business Mathematics for Senior High School

Chapter Title : Salaries and Wages
Lesson : Taxable and Nontaxable Compensation and Benefits
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Explain the different labor laws and regulations that pertain to the compensation and
benefits of wage earners; and
• Distinguish taxable from nontaxable compensation and benefits.
______________________________________________________________________________

In this lesson, we will discuss the basic Philippine labor laws and regulations one by one,
specifically those that are related to the compensation and benefits of wage earners.

Minimum Wage

Every Filipino wage earner should at least earn the minimum wage in his or her
region. Republic Act 6727 or The Wage Rationalization Act states the required minimum wage
per region, province, and industry.

SOURCE: National Wages and Productivity Commission

Department of Labor and Employment
 25

Overtime Pay During Regular Working Days

The Philippine Labor Code requires that the maximum number of working hours per
day should be 8 hours. If a wage earner performs work beyond 8 hours, he/she is already working
overtime. For every hour in excess of 8 hours in a day, he or she should be entitled to an overtime
pay that is equivalent to at least 125% of his/her hourly wage.

Example 1: Calculating Overtime Pay on a Regular Working Day.

During a mall sale, Amlong, who is working as a bagger, rendered 4 hours more than his required
working hours. If he is paid P50.50 an hour, how much is his overtime pay?

Answer:
(1.25) (50.50) = 63.125
(4) (63.125) = 252.50, overtime pay for the 4 hours extra time rendered.

Premium Pay During Rest Days and Special Holidays

Every Filipino wage earner is entitled to a premium pay for performing work during
nonworking days such as rest days and special holidays. A premium pay refers to the additional
compensation required by law for work performed within 8 hours on nonworking days such as
scheduled rest days and special holidays. The Labor Code requires at least one (1) rest day per
week for all wage earners. There are three (3) identified special holidays in the Philippines – Ninoy
Aquino Day, All Saints Day, and the last day of the year. Wage earners are not entitled to any
compensation if they do not work on these days.

Premium Pay During Rest days and Special Holidays

• If a wage earner performs work on his/her scheduled rest day (for example Sunday) or on
a special holiday, he or she is entitled to a premium pay that is equivalent to his/her regular
daily wage plus at least 30% of his/her daily wage.

• If a wage earner performs work on a special holiday that falls on his/her scheduled rest
day, he/she is entitled to a premium pay that is equivalent to his/her regularly daily wage
plus at least 50% of his/her daily wage.

Example 2: Computing the Premium Pay on a Rest Day or Special Holiday

Amlong works as a manager in a certain company and earns a daily wage of P875. On one of his
rest days, the company needs his service. How much will be his premium pay if he works during
his rest day? Suppose his rest day falls on All Saints Day and he needs to work. How much will
be his premium pay?

Answer:
1. (1.30) (875) = 1,137.50

2. (1.50) (875) = 1,312.50

 26

Premium Pay During Regular Holidays

Every Filipino wage earner is entitled to a holiday pay for performing work on
nonworking regular holidays. Unlike in the case of special holidays for which wage earners are
not compensated if they do not work, during regular holidays they receive their basic wage even
if they do not work. In the Philippines, there are 12 regular holidays, as stated in the Republic Act
9849. A holiday pay refers to the additional compensation required by law for work performed
within 8 hours on nonworking regular holidays.

Premium Pay During Regular Holidays

• If a wage earner performs work on a regular holiday, he/she is entitled to a holiday pay that
is equivalent to at least twice his regular daily wage.

• If a wage earner performs work on a regular holiday that falls on his/her scheduled rest
day, he/she is entitled to the holiday pay rate (which is twice or 200% of his regular daily
wage) plus at least 30% of his or her holiday pay rate.

Example 3: Computing the Holiday Pay

Suppose the daily wage of Amlong is P620. Compute his holiday pay if he:
Did not work on a regular holiday;
Worked on a regular holiday; and
Worked on a regular holiday which happens to be his rest day.

Answer:
P620
2(620) = P1,240
2.30 x 620 = P1,426

Night Shift Differential

Every Filipino wage earner is entitled a night shift differential for performing work
between 10pm to 6am. A night shift differential is the additional compensation given to an
employee who works during the abovementioned condition. Employee receives a night shift
differential that is equivalent to at least 10% of his regular daily wage.

Example 4: Computing the Night Shift Differential

A call center agent works 8 hours a day and earns a daily wage of P750. if he needs
to work on a night shift (that is 10pm to 6am) for 5 days in a certain month, how much will he earn
for that month? Assume that there are 22 working days in a month.

Answer:
Monthly salary: 22(750) = 16,500
Night shift for duty: 5(0.10) (750) = 375
Gross earnings for the month = 16,500 + 375 = 16,875
 27

Service Charge

A wage earner in a company that collects service fees from its clients is entitled to a
service charge. A service charge is the amount that hotels, restaurants, and similar establishments
receive from their clients as payment for performing certain services. The Labor Code states that
such service charges shall be distributed at a rate of 85% for all covered employees and 5 % for
the management.

Example 5: Computing the Share of a Wage Earner from a Service Charge

An auto mechanic was asked to change the oil and tune up Mr. Brent’s truck. After finishing the
work, Mr. Brent paid P800 for the service charge. If the shop has 16 employees, how much of the
service charge will the mechanic receive?

Answer:
85% x 800 = 680
680 / 16 = 42.50, will be distributed per employee.

Note that the 6 types of compensation and benefits that we discussed previously apply to all wage
earners except for the following:

• Government employees
• Managerial employees
• Field personnel
• Domestic helpers
• Persons who are performing personal service for another
• Workers who are paid by results or based on their output

Service Incentive Leave

Every Filipino wage earner who has rendered at least one year of service is entitled
to a service incentive leave of 5 days with pay. A service incentive leaves maybe either a sick leave
or a vacation leave. If the SIL is not used at the end of the year, it can be converted into cash by
applying the daily wage rate of the employee.

Maternity, Paternity, and Parental Leaves

A female wage earner is entitled to a maternity leave benefit equivalent to 100% of

her current wage for 60 days in case of normal delivery, or 78 days in case of caesarean delivery,
for up to four pregnancies. A male wage earner is entitled to a paternity leave benefit of 7 days for
each of the first four deliveries of his legitimate spouse. A parental leave benefit of 7 days is also
granted to a solo-parent wage earner.

13th Month Pay

Every Filipino wage earner is entitled to a 13th month pay, provided that he or she
worked for at least one month during a calendar year. The 13th month pay is a form of monetary
benefit equivalent to the monthly basic salary of an employee or at least one-twelfth of his annual
basic salary. It is computed on a prorated basis according to the number of months within a year
that the employee has rendered service for the employer.
 28

Example 6: Compute the 13th Month Pay of Wage Earner

Amlong is a cashier in a department store. Below is a summary of his basic salary each month in
one year.

Answer:
Recall that the 13th month pay must be at least one-twelfth of an employee’s annual basic salary.
1/12 (108,700) =9,058.33

Separation Pay

Filipino wage earners who are validly dismissed from a company for causes other
than serious misconduct is entitled to a separation pay.

Source: Labor Code

 29

Retirement Pay

Upon reaching the retirement age, every eligible Filipino wage earner is entitled to a
retirement pay.
Under the labor code, the retirement pay is equivalent to at least half-month salary for
every year of service.

Nontaxable Benefits
• 13th month pay
• Christmas bonuses
• Productivity and incentive bonuses
• Other benefits of the same nature in cash or in kind.
• De minimis benefits
Based on the tax code, the following benefits are excluded from the computation of gross income,
provided that the amount remains below ₱82,000.
 30

Subject : Business Mathematics for Senior High School

Chapter Title : Salaries and Wages
Lesson : Standard Deductions
Week/Date :
______________________________________________________________________________

Learning Outcomes:
At the end of the lesson you should be able to:
• Enumerate and compute the standard deductions from an employee’s gross income.
______________________________________________________________________________

Standard deductions are mandatorily applied on the gross earnings of an employee. The standard
deductions include the following:
• Social Security System contribution for employees in the private sector;
• Government Service Insurance System contribution for employees in the public sector
• PhilHealth contribution for all employees
• Home Development Mutual Fund or Pag-IBIG contribution for all employees;
• And withholding tax for all employees

Social Security System (SSS) Contribution

 31

Take note of the following meanings of Codes normally used by SSS:

• EE: employee’s share
• EC: employee’s compensation program
• VM: voluntary members
• ER: employer’s share
• SE: self-employed
• OFW: members who are overseas Filipino workers

Example: If Amlong is earning ₱12,000 monthly, how much is his monthly SSS contribution?

Answer:
Looking at the table of SSS Contribution on the next page, Amlong’s salary is within the range of
compensation 11,750 to 12,249.99. Therefore, Amlong’s share is ₱480. But his total SSS
contribution is ₱1,440 = 960 (Employer’s Share) + 480 (Amlong’s share).
32
 33

Philippine Health Insurance Corporation (PhilHealth)

For all employees covered by SSS, a medical benefit is also mandatorily given. This is
where the employees’ PhilHealth contributions are used. The Philippine Health Insurance
Corporation (PhilHealth) has released a new contribution schedule for its Direct Contributors in
accordance to the Universal Health Care Law of 2019 and its implementing rules and regulations.
The new premium schedule takes effect on December 7, 2019 or 15 days after the
publication of its Circular 2019-0009. Its application for employed members will be for the
applicable month of December 2019 (which is payable on January 2020). Meanwhile, the rest of
Direct Contributors may still avail of the existing rate of P2,400/year (or P3,600/year for those
earning more than P25,000 per month) for a maximum of three years until December 6, 2019 only.
Starting December 7, 2019, the new rate shall apply to all Direct Contributory members using the
following schedule:

Example: If Amlong is earning ₱12,000 monthly, how much is his monthly PhilHealth
contribution?

Answer:
Based on the table above, Amlong’s monthly salary of ₱12,000 for year 2020, falls within the
range of ₱10,000.01 to ₱69,999.99 with mandated 3% premium rate.
So, we have 12,000 × 0.03 = 360. Hence, Amlong’s monthly PhilHealth share is ₱360.
 34

Home Development Mutual Fund (HDMF) or Pagtutulungan sa Kinabukasan: Ikaw,

Bangko, Industria at Gobyerno (Gag-IBIG)
The HDMF establishes a national savings program and an affordable house financing
system for Filipino Employees. The benefits you are entitled to are the following:
• Savings
• Short-term loans
• Access to low-cost housing programs

Example: If Amlong is earning ₱12,000 monthly, how much is his monthly Pag-IBIG
contribution?

Answer:
It was given that Amlong’s salary is over ₱1,500.
Therefore, his share from Pag-IBIG contribution is: ₱12,000 × 0.02 = ₱240
But Amlong’s total Pag-IBIG fund for the month is ₱480 = 240 (Amlong’s share) + 240 (Employer)

Withholding Tax
A withholding tax is an amount that an employer withholds from employees’ wages and
pays directly to the government. The amount withheld is a credit against the income taxes the
employee must pay during the year.
 35

Example: Getting the Withholding Tax

Let’s say, Amlong has the following monthly salary:
Scenario 1: ₱12,000
Scenario 2: ₱24,000
Scenario 3: ₱48,000
What is his’ withholding tax?

Answer:
1. 12,000 × 12 months = 144,000 (no tax since its below 250,000)

2. 24,000 × 12 months = 288,000

288,000 – 250,000 = 38,000
38,000 × 0.20 = 7,600 is the withholding tax

3. 48,000 × 12 months = 576,000

576,000 – 400,000 = 176,000
176,000 × 0.25 = 44,000
44,000 + 30,000 = 74,000 is the withholding tax

Sample Payslip of an Employee

END