GENMATH REVIEWER Q2

WEEK 1
C. Let’s Clarify Things

Interest (I)
 Amount paid for the use of another amount of money called the principal amount or
simply principal.
 Can be calculated as simple interest and compound interest.

Principal (mathematical term)

 The base in which interest is computed.
 Amount loaned or borrowed.

Term (t)
 Time for which the principal is loaned, or the length of time the principal is borrowed.

Interest Rate (r)

 The multiplier expressed as percent of the principal to be paid each term.

Maturity Value(A)
 The sum of the principal and the interest that accumulates over the agreed term (usually
expressed in years or a fraction of a year).

*Note: If the term is not stated in a given situation, it is understood as percent per annum.

Types of Interest
Simple Interest
 Amount earned for one year calculated by multiplying the principal by the interest rate
(applied for transactions that usually last only for less than a year).
 I = Prt

Examples
1. If the simple interest for a principal in 4 months is ₱100, the simple interest for the same
principal in 8 months is ₱200.
2. If the simple interest for a principal at 3% is ₱500, the simple interest for the same
principal at 6% is ₱1,000.
3. If the simple interest on the principal amounting to ₱100,000 is ₱500 over a contract
term, the simple interest on the principal amounting to ₱500,000 is ₱2,500 over the same
contract term.

Compound Interest
 Amount earned for one year calculated by multiplying the principal by the interest rate.
 Usually used for long-term transactions.
 In = A n - P

Compound Amount
  The accumulate amount of a given principal at the end of a given time interval.
r
 An = P(1 + )mt
m

WEEK 2
C. Let’s Clarify Things

Problem Solving Involving Simple and Compound Interest

Examples:
1. An amount of ₱150,000 is invested for 9 months at 4%, find the interest and maturity value.
Interest
 I = Prt ; formula of interest
3
 I = (₱150,000)(0.04)( ) ; substitute the given
4
 I = ₱4,500 ; final answer

Maturity Value
 A = P + I ; formula of maturity value
 A = ₱150,000 + ₱4,500 ; substitute the given
 A = ₱154,500 ; final answer

2. A dollar investment of $1,200 is transacted for 5 months at 6%, find the interest and maturity
value.
Interest
 I = Prt ; formula of interest
5
 I = ($1,200)(0.06)( ) ; substitute the given
12
 I = $30 ; final answer

Maturity Value
 A = P + I ; formula of maturity value
 A = $1,200 + $30 ; substitute the given
 A = $1,230; final answer

3. An amount of ₱1,000,000 is invested in a financial institution. How long will it take for the
amount to reach ₱1,001,000 at 2% simple interest? At what interest rate will it earn ₱1,000 in 10
months?
Time
 I = Prt
I
 t= ; derived the formula from the formula of interest
Pr
 ₱ 1,000
 t= ; substitute the given
( ₱ 1,000 , 000 ) (0.02)
 t = 0.05
 Since there are 12 months in a year, it will take (12)(0.05) = 0.6 month, or approximately
(0.6)(30 days) = 18 days (final answer)

4. Find the compound amount and compound interest on a loan of ₱50,000 at 6% for 6 years
compounded semi-annually.
Compound Amount
r
 An = P(1 + )mt ; formula of compound amount
m
0.06 (2)(6)
 An = ₱50,000(1 + ) ; substitute the given
2
 An = ₱50,000(1 + 0.03)12 ; simplify
 An = ₱50,000(1.03)12
 An = ₱71,288.24 ; final answer

Compound Interest
 In = An – P ; formula of compound interest
 In = ₱71,288.24 – ₱50,000 ; substitute the given
 In = ₱21,288.24 ; final answer

5. Compute for the compound amount and compound interest on ₱100,000 principal for 2 years
at 3% compounded quarterly.
Compound Amount
r
 An = P(1 + )mt ; formula of compound amount
m
0.03 (4)(2)
 An = ₱100,000(1 + ) ; substitute the given
4
 An = ₱100,000(1 + 0.0075)8 ; simplify
 An = ₱100,000(1.0075)8
 An = ₱106,159.88 ; final answer

Compound Interest
 In = An – P ; formula of compound interest
 In = ₱106,159.88 – ₱100,000 ; substitute the given
 In = ₱6,159.88 ; final answer

WEEK 3
C. Let’s Clarify Things
Annuity
 A term that refers to a deposit or investment agreement between a potential depositor or
investor and a financial institution that promises to pay out a steady amount of money
over time. This agreement contains the commercial terms such as deposit terms, interest
rate, and disbursement terms.
 The ultimate purpose of an annuity is to make sure that the investor will get steady source
of funds.
 According to Investing Answers Financial Dictionary, annuity is a contract whereby an
investor makes a lump-sum payment to an insurance company, bank, or other financial
institution that, in return, agrees to give the investor either a higher lump-sum payment in
the future or series of guaranteed payments.
 The word annuity was derived from the Latin word annuus which means “annual.”
 The concept of annuity is very much related to the foundation of simple and compound
interests. The only difference lies in the complexity of the components of the financial
instrument.
 Annuity comes in the picture when you save or invest either lump sum or installment, and
when you receive this investment in the future through installment.

Classification of Annuities by correspondence with interest periods:

Simple Annuity
 An annuity where compounding and payment periods happen at the same time.
 For example, your mom decided to join to Paluwagan sa Kooperatiba Program and
agreed to contribute ₱1000 per month beginning in January 2021 which will earn 3%
compounded monthly.

Kinds of Simple Annuity

Annuity certain – the term is given by a fixed time interval.
Perpetuity – a time interval that begins at a definite date but extends indefinitely.
Contingent annuity – one that is not fixed in advance.

General Annuity
 The basic difference of a general annuity from a simple annuity is that the general
annuity’s compounding and payment periods do not happen at the same time.
 For example, a life insurance’s contribution is monthly while the interest is compounded
quarterly.

Classification of Annuities by payment dates:

Ordinary Annuity
 Payments are made at the end of each period.

Annuity Due
 Payments are made at the beginning of each period.

Complex Annuity
 Payment period does not coincide with the interest conversion period.
 WEEK 4
C. Let’s Clarify Things

Problem Solving Involving Simple and General Annuities

Examples:
1. Your mom decided to join their office cooperative and agreed to contribute ₱1,000 per
month beginning in January 2021 which will earn 3% compounded monthly. How much
will be the future value of your mom’s contribution at the end of April 2021?

Solution
 Compute the interest per month.
3%
= 0.0025 or 0.25%
12
 Compute for the future value at the end of June 2021.
January 2021: ₱1,000
February 2021: ₱1,000 + ₱1,000(1 + 0.0025) = ₱2,002.50
March 2021: ₱1,000 + ₱1,000(1.0025) + ₱1,000(1.0025)2 = ₱3,007.51
April 2021: ₱1,000 + ₱1,000(1.0025) + ₱1,000(1.0025)2 + ₱1,000(1.0025)3 = ₱4,015.03

 The future value of your mom’s contribution at the end of April 2021 is ₱4,015.03

2. Consider the example number 1, how much more will your mom have if the principal
continues to grow, say in 5 years?

Solution
 You can solve it using manual computation, like the example above. But in this situation,
you must use the formula below for future value of an ordinary annuity.
(1+ I )NT −1
Future Value of an Ordinary Annuity = R [ I ]
where future value is the principal
plus interest, R is the regular contribution for a specified period of time, I is the interest
rate, N is the number of times the interest is compounded, and T is the number of years or
the investment period.
 Apply the formula then solve for the future value.
(1+ I )NT −1
Future Value = R [ I ]
(1+0.0025)12 (5 )−1
Future Value = ₱1,000 [ 0.0025 ]; substitute the given then simplify

(1+0.0025)60−1
Future Value = ₱1,000 [ 0.0025 ]
Future Value = ₱1,000(64.6467)
Future Value = ₱64,646.70
 Your mom’s decision to save ₱1,000 per month for 5 years was worth it. She earned an
interest of ₱4,646.70.

3. Your dad applied for a term life insurance. He got a flexible policy because some
payment options include a policy payout as soon as the target period is achieved or upon
contingency (death or accident). Some companies offer insurance products that can be
availed only upon death. Because of this better option, your dad decided to avail of
Insurance A’s flagship insurance product. Your dad’s contribution per year is ₱20,000
that earn 6% compounded monthly for 20 years. How much will be paid out to your dad
after 20 years by Insurance A?

Solution
 Apply the formula of ordinary annuity as follows:
(1+ I )NT −1
Future Value = R [ I ]
(1+0.005)12(20) −1
Future Value = ₱1,666.67 [ 0.005
240
]
Future Value = ₱1,666.67 [(1.005) −1
0.005 ]
Future Value = ₱1,666.67(462)
Future Value = ₱700,000
4. Your parents are planning to save for their retirement. They target to accumulate
₱5,000,000 in 10 years. To do this, they want to set a portion of their salaries and
contribute monthly for their retirement funds. How much should they contribute per
month if they will have a chance to invest in an annuity that earns 5% compounded
quarterly?

Solution
 Derive the formula of R in formula of future value of an ordinary annuity.
I
R = Future Value x NT
(1+ I ) −1
0.0125
R = ₱5,000,000 x
(1+0.0125)120 −1

0.0125
R = ₱5,000,000 x
4.44−1
0.0125
R = ₱5,000,000 x
3.44
R = ₱5,000,000 x (0.00363372)
R = ₱18,168.60
 WEEK 5
C. Let’s Clarify Things

Stocks
 Defined as shares of ownership in a corporation.
 Most of the corporations listed in a stock exchange house are the top tier corporations.
Classification of Stocks
Common Stock
 Is a security that represents ownership in a corporation.
 Holders of common stock elect the board of directors and vote on corporate policies.

Preferred Stock
 Have a higher claim to dividends or asset distribution than common stockholders.
 The details of each preferred stock depend on the issue.
 Usually have no or limited, voting rights in corporate governance.

Dividend
 Is a distribution of cash or stock to a class of shareholders in a company

Classifications of Dividends according to their Characteristics

Cash Dividend
 A type of dividend that is paid through cash.

Stock Dividend
 This is the issuance by a company of its stock to its shareholders. In other words, instead
of receiving cash as profit, the stockholder receives more shares of stocks, or a portion
thereof.

Property Dividend
 Recorded at the fair market value of the property of the assets or property distributed.

Scrip Dividend
 A certain company may not have enough liquidity to distribute cash dividends in the near
future; so instead, it issues a scrip dividend.
 Is essentially an obligation to pay or simply a promissory note (which may include
interest) to pay shareholders at a specific date.

Liquidating Dividend
 A kind of dividend that a stockholder may like to have depending on his or her
investment goals.
 It is usually a glaring sign that the company is already winding down its business.

The Stock Market

 It is a place where stocks are bought and sold.
 Vital components of a free-market economy because they enable democratized access to
trading and exchange of capital for investors of all kinds.
 They perform several functions in markets, including efficient price discovery and
efficient dealing.

The Stockholder
 Also referred to as a stockholder, is a person, company, or institution that owns at least
one share of a company's stock, known as equity.
 Shareholders are subject to capital gains (or losses) and/or dividend payments as residual
claimants on a firm's profits.
 Shareholders also enjoy certain rights such as voting at shareholder meetings to approve
the board of directors, members, dividend distributions, or mergers.

Bonds
 Is a fixed-income instrument that represents a loan made by an investor to a borrower
(typically corporate or governmental).
 Bonds are used by companies, municipalities, states, and sovereign governments to
finance projects and operations.
 Owners of bonds are debtholders, or creditors, of the issuer.
 Bond prices are inversely correlated with interest rates: when rates go up, bond prices fall
and vice-versa.
 Bonds have maturity dates at which point the principal amount must be paid back in full
or risk default.

Types of Bonds and Their Functions

Corporate Bonds
 Bonds issued by the most established corporations.
 In our country (Philippines), most bond issuers are from the banking sector, real estate,
and telecommunications industry.

Secured Bonds
 Bonds that are backed up by corporate collaterals that have substantial value such as a
property, plant, or equipment.
 A collateral is a valuable asset of a borrower that is pledged as a security for a loan
which will be automatically transferred to the lender in case of a borrower’s default.

Unsecured Bonds
 Bonds that are not collateralized by any substantial corporate asset.
 These bonds are only issued with “good faith.”

Convertible Bonds
 Bonds that can be interchanged with shares of stock.
 Callable Bonds
 Bonds that can literally be recalled or redeemed by the issuer even before the bonds
mature.

The Bond Market

 Broadly describes a marketplace where investors buy debt securities that are brought to
the market by either governmental entities or corporations.
 National governments generally use the proceeds from bonds to finance infrastructural
improvements and pay down debts.
 Companies issue bonds to raise the capital needed to maintain operations, grow their
product lines, or open new locations.
 Bonds are either issued on the primary market, which rolls out new debt, or on the
secondary market, in which investors may purchase existing debt via brokers or other
third parties.
 Bonds tend to be less volatile and more conservative than stock investments, but also
have lower expected returns.

WEEK 6
C. Let’s Clarify Things

Bond Valuation
 The present value of cash flows an investor expects to receive.
 Bonds are generally characterized by a promise to pay bondholders a specific amount of
income or interest which is called coupon.
 Coupon rate can be calculated by dividing the peso annual coupon payment by the
bond’s par or book value.
 Coupon yield can be calculated by dividing the coupon payment by the bond’s fair
market value or current market price.

Stock Valuation
 Valuing stocks is essentially the process of computing the market value of a company and
its stock price.
 One of the most common and practical ways of valuing stocks is the market valuation.
 The market value of a publicly traded listed company, also called as market
capitalization, is computed using the formula:
Market Capitalization = Stock Price x Outstanding Shares of Stock

Problem Solving Stocks and Bonds

Examples:
 5. What is the purchased price of 20 XYZ Corporation bonds with a coupon rate of 10% and
a current market price of ₱110,000? The par value of the bond is ₱100,000. The
commission charge is ₱1,000 per bond. The date of the transaction is 1 May, and the
bond pays interest every 1 January and 1 July.

Solution
Step 1: Find the accrued interest
 Accrued interest is the accumulated interest from the last payment date that must be paid
to the seller by the buyer. This usually happens when bonds are traded between the stated
interest payment dates. The formula for accrued interest is the same as simple interest;
that is, I = PRT. P represents the face value of the bond, R is the coupon rate, and T is the
number of days since the last payment date divided by 360 days or 12 months depending
on the time that is stated in the problem.
2
Accrued Interest = ₱100,00 x 10% x (from 1 January to 1 July)
12
Accrued Interest = ₱1,666.67

Step 2: Find the price per bond.

 The price per bond can be computed using the formula below.
Price per Bond = Current Market Price + Accrued Interest + Commission
Price per Bond = ₱100,000 + ₱1,666.67 + ₱1,000
Price per Bond = ₱112,666.67

Step 3: Find the total bond purchase price

 The total bond purchase price can be computed using the formula below.
Total Purchase Price = Price per Bond x Number of Bonds
Total Purchase Price = ₱112,666.67 x 20
Total Purchase Price = ₱2,253,333.40

6. What are the proceeds of the sale of 10 TUV University bonds with a coupon rate of
8.5% and a current market price of ₱120,000? The commission charge is ₱1,200 per
bond. The date of the transaction is 90 days since the last interest payment. The par value
of the bond is ₱100,000.

Solution
Step 1: Find the accrued interest
90
Accrued Interest = ₱100,00 x 8.5% x
360
Accrued Interest = ₱2,125

Step 2: Find the proceeds per bond.

 The proceeds per bond can be computed using the formula below.
Proceeds per Bond = Current Market Price + Accrued Interest - Commission
Proceeds per Bond = ₱120,000 + ₱2,125 - ₱1,200
Proceeds per Bond = ₱120,925
Step 3: Find the total proceeds
 The total proceeds can be computed using the formula below.
Total Proceeds = Proceeds per Bond x Number of Bonds Sold
Total Proceeds = ₱120,925 x 10
Total Proceeds Price = ₱1,209,250
7. On 21 November 2015, Telco Company ended the day with a stock price of ₱100. Telco
Company has total outstanding shares of 1,000,000 as of the same date. How much is the
market capitalization of Telco Company?

Solution
Applying the given formula of market capitalization
Market Capitalization = Stock Price x Outstanding Shares of Stock
Market Capitalization = ₱100 x 1,000,000
Market Capitalization = ₱100,000,000

END OF GENMATH REVIEWER Q2

ORGMA REVIEWER Q2
WEEK 1
C. Let’s Clarify Things.

NATURE OF ORGANIZATION
Definition of Terms
 Organization- a collection of people or groups of people working together to achieve a
common goal.
 Organizing- a management function which involves assigning task, allocating resources,
and coordinating work activities in order to achieve a common purpose.
 Organization Chart- a visual representation of the organization’s structure showing the
different job positions in the firm and their hierarchical arrangement for the purpose
driving labor and providing a picture of the reporting structure.

Types of relationships inside an organization

1. Formal Relationships – is based on a structure of roles that aims to achieve
organizational goals consciously and deliberately. It performs tasks to accomplish the
common purpose as mandated by the management decree
2. Informal Relationships – is among people that extend beyond those relationships
established by management. It does not appear on the organizational chart.

Authority
 the right to perform or command. It is exercised by a manager over those who reports to
him in order to get things done. Authority is exercised in relation to responsibility.
Types of authority:
1. Line Authority – formal authority exercised by managers over subordinates.
2. Staff authority – consists of the right authority to advise those who are in line according
to one’s area of expertise.
3.
Departmentalization
 It is the act by which tasks and responsibilities are assigned to departments.
 It is based on any of the following factors: Task, Product, Territory, Customer, or
Process.
 And it establishes departments as a way to institute formal relationships among people
and resources in an organization.
 The characteristics of the business determines the best way to departmentalize.

Types of Departmentalization
1. Functional Departmentalization
 an establishment of a department based on tasks.
 They are grouped because of a similar skill or knowledge to carry out tasks.
 This is best for firms that produce only one or two products especially if managers
communicate across functions.
2. Geographical Departmentalization
 an establishment of a department based on territory.
 This type works best for firms with different locations.
 3. Product Departmentalization
 an establishment of a department based on the product line.
 This would be inefficient and high-cost for small or medium firms and best for
large firms because it shows the product line to be expanded.
4. Process Departmentalization
 an establishment of a department anchored on customer or product flow.
 This type works best for firms with different locations.
5. Customer Departmentalization
 an establishment of a department base on the type of customers they interact with,
which can be further grouped according to their specialized needs.
 This type works best for firms with different locations.

Types of Organization Structure

 An organization structure is a system made up of task to be accomplished, work
movements from one work level to other work levels in the system, reporting
relationship, and communication passageways that unite the work of different individual
person or group.

1. Vertical Structure
o Clear out issues related to authority rights, responsibilities, and reporting
relationship.
o Authority rights refer to the legitimate
rights of individuals, appointed in
positions like president, vice president,
manager, and the like, to give orders to
their subordinates, who in turn, report to
them that they have done.

2. Horizontal Structure
o Refers to the

departmentalization of an organization smaller work units as tasks become

increasingly varied and numerous.
3. Network Structure
o It is a
collection of
independent,
mostly single
function
enterprises that collaborate on a good or service.
o The key to the network organization is electronic communication, where
information is shared with member enterprises with distinct competencies.
4. Divisional Organization
o when the products, customers, and/or geographical locations of an enterprise grow
and continue to diversify, a functional structure may not serve its developmental
need, a divisional organization where the enterprise is grouped into products,
customers, or geographical locations, maybe a better structure.
o Typically, it is used in larger companies or organizations with several branches or
outlets that operate in a wide geographic area or that have separate smaller
organizations within the umbrella group to cover different types of products or
market.
 WEEK 2
C. Let’s Clarify Things

ORGANIZATION THEORIES AND APPLICATION

Organizational Design
 the manner in which a management achieves the right combination of differentiation and
integration of the organization’s operations, in response to the level of uncertainty in its
external environment.
 There are two classifications of theories regarding organizational design according to
Robbins and Coulter (2009):
o Traditional- pertains to the usual or old-fashioned ways.
o Modern- refers to contemporary or new design theories.

TRADITIONAL ORGANIZATIONAL DESIGN THEORIES INCLUDE:

SIMPLE
 It has centralized authority figure and has very little formalization of work usually
used by companies that start out as entrepreneurial ventures.
 Simple structure depicts a small startup business, in which the simple structure is
very common, with few employees and an owner who manages and controls the
majority of the business functions.

LINE & STAFF

 The Line and Staff Organization is a modification of the Line Organization. Here,
functional specialists work with line managers to guide and advise them. This
structure is more common in present-day, and most of the larger enterprises adopt
this type of set up.
 The staff consists of two categories; the general and the specialized team.
 General Staff- The general staff consists of the ordinary employees that assist the
top management. These staff aren’t experts.
 Specialized Staff- This team consists of experts that offer services to the
organization. Their roles can be advisory, control (as in quality control), or
service (such as maintenance). The Line and Staff Organization uses the expertise
of specialists. So, the line managers become better in several fields.

FUNCTIONAL
 It has group together similar or related specialties.
 Functional departmentalization utilized and put into practice in entire
organization.
 A functional org structure starts with positions with the highest levels of
responsibility at the top and goes down from there.
 Primarily, though, employees are organized according to their specific skills and
their corresponding function in the company.
 Each separate department is managed independently.

DIVISIONAL
  It is made up of separate business divisions or units where the patent corporation
acts as oversee to coordinate and control the different divisions and provide
financial and legal support services.

MODERN ORGANIZATIONAL DESIGN THEORIES INCLUDE:

TEAM DESIGN
 Is made up of works group or work teams.
o Advantages- include empowerment of team members and reduces barriers
among functional areas.
o Disadvantages- including a clear chain of command and great pressure on
teams to perform.

MATRIX-PROJECT DESIGN
 Which refers to an organization where specialists from different departments
work on projects that are supervised by a project manager.
o Advantage- specialist are involved in the project.
o Disadvantage- task and personality conflicts.

BOUNDARY-LESS DESIGN
 Is another design where the design is not defined or limited by vertical, horizontal
and external boundaries.
 There are no hierarchical levels that separate employees, no departmentalization,
and no boundaries that separate the organization from customer, supplier and
other stakeholders.

WEEK 3
C. Let’s Clarify Things.

THE CONCEPT AND NATURE OF STAFFING

Staffing
 Staffing is a critical organizational function that consists of the process of acquiring,
deploying, and retaining a workforce of sufficient quantity and quality to create positive
impacts on the effectiveness of the organization.
 It is one of the significant functions of management.

Nature of Staffing
 It is a universal function. It is the responsibility of every manager.
 It is a continuous function performed by every manager to ensure the successful
functioning of his department and to develop his successors. Since staffing is a
continuous function, it will be effective in realizing its goals.
  It is a dynamic and never-ending process. With changes in the size and environment of
the organization, changes take place in personnel.
 Human resources expect and deserve dignity. So, the success of the staffing function lies
in involving every individual in the organization in the task of achieving organizational
goals.
 It is a difficult function with problems of social, philosophical, and psychological nature.
 Staffing is a management function.
 It is an essential part of the management process.
 Staffing is the persistent function of management.
 Staffing is concerned with the optimum utilization of human resources.

Functions of Staffing
 The first and foremost function of staffing is to acquire both qualified and competent
personnel for various job positions in the organization.
 In staffing, the right applicant is recruited for the right jobs; therefore, it leads to
maximum productivity and higher performance.
 It helps in promoting the optimum utilization of human resources through various
aspects.
 Job satisfaction and morale of the workers increases through the staffing of the right
person.
 Staffing helps guarantee better utilization of human resources.
 It ensures the continuity and growth of the organization, through development managers

Human Resources
 Managers often consider human resources as their organizations most important
resources.
 They are also called human capital, intellectual assets or management or company talents.
 Also, human resources are the drivers of organization’s performance; hence, staffing
must be considered as a crucial function of managers.

The Management and Nonmanagerial Human Resources Inventory

 the management potential within an organization can be accomplished with the use of an
inventory chart, also called management succession/replacement chart.
 for nonmanagerial human resources may be ascertained by the use of a general
organization chart to identify vacant job positions that need to be filled or by direct
reports from the department/unit heads or supervisors.

This aids the HR managers to make better decisions in several areas, including but not
limited to:
1. Hiring qualified staff for meeting current as well as future needs of various business
departments
2. Allocation of the right employee to the right job
3. Ensuring organizational success by efficient staffing
4. Analyzing current deficits and taking up the right training programs to bridge the skill
gaps
5. Strategizing a workforce plan for the future needs of the business.
Two Components of Staffing
 Staffing has two main components: recruitment and selection. The process of finding and
hiring the best-qualified candidate (from within or outside of an organization) for a job
opening, in a timely and cost-effective manner is called recruitment.

External and Internal Forces Affecting Present and Future Needs for Human Resources
 present and future needs managers and other human resources are affected by both
external and internal forces.
 External forces include economic, technological, social, political and legal factors.
Example: Economic progress in a particular country may bring about increased needs and
wants among people, resulting, in turn, in increased demand for certain products,
followed by the expansion of the company and its work-force, as well as increased
demand for managers.
 The type of work that have to be done, salary scales and the kinds of people employed by
the company, are among the internal factors or forces that affecting staffing.
Example: Salary scale offered by a company may be high enough to attract personnel
who are really qualified for the job.

WEEK 4
C. Let’s Clarify Things.

RECRUITMENT
 A set of activities designed to attract qualified applications for job position vacancies is
an organization.

Types of Recruitment
External Recruitment- outside sources are considered in the process of locating
potential individuals who might want to join the organization and encouraging them to apply for
actual or anticipated job vacancies.
Internal Recruitment- filling job vacancies can be done through promotions or transfer
of employees who are already part of the organization. In other words, recruitment is from within
the organization.

Types of Internal Recruitment

 Employee referrals- are recommendations from the organization’s present employees
who usually refer friends and relatives who they think are qualified for the job.
 Promotion- is the act of advancement of employee’s post in the company
 Transfer- In large scale organizations having several branches, human resource need of
one branch can be fulfilled by the human resource of another branch.
INTERNAL RECRUITMENT
ADVANTAGES DISADVANTAGES
1. Encourages hard work and develops 1. Promotes unemployment
 employees. 2. Promotes favouritism
2. Accurate selection 3. Limited choice
3. Economic in nature
4. Strengthens employer-employee
relationship.
5. Adaptability.

Types of External Recruitment

 Advertisements- is the most widely used method for external recruitment. Companies
announce vacancies through electronic and print media such as newspaper, magazines,
television, radio and internet.
 Walk-ins- are those who enter the organization in search of job. This method is
applicable for unskilled and semi-skilled posts.
 Internet recruiting- there are thousands of independent job boards on the Web
commonly used by job seekers and recruiters to gather and disseminate job opening
information.
 Executive search firms- also known as "head hunters" they help employers find the right
person for a job.
 Educational institutions- good sources of young applicants or new graduates who have
formal training but with very little work experience for technical and managerial
positions.
 Professional associations- may offer placement services to their members who seek
employment
 Labor unions- possible sources of applicants for blue-collar and professional jobs.
 Public and private employment agencies- may also be good sources of applicants for
different types of job vacancies.
EXTERNAL RECRUITMENT
ADVANTAGES DISADVANTAGES
1. Qualitative human resources 1. Demoralize employee.
2. Rejuvenates organization 2. High cost
3. Better adaptation to the changing 3. Adaptability problems
environment. 4. Chances of wrong selection
5. Promotes nepotism

SELECTION
 The selection process can be defined as the process of selection and shortlisting of the
right candidates with the necessary qualifications and skill set to fill the vacancies in an
organization.
 The selection process varies from industry to industry, company to company and even
amongst departments of the same company

The selection process typically includes the following steps:

1. Establishing the selection criteria
 Selecting human resources in an organization requires understanding of the nature and
purpose of the job position which has to be filled.
2. Requesting applicants to complete the application form
  Application forms must be completed because these provide the needed information
about the applicant.
3. Screening by listing applicants who seem to meet the set criteria
 This involves the preparation of a shortlist of applicants who meet the minimum
requirements of the job position to be filled.
4. Screening interview to identify more promising applicants
 Here, a shortlist of applicants is prepared. Included in the list are the applicants who will
be asked to undergo formal interview by the supervisor/ manager.
5. Interview by the supervisor/manager or panel interviewers
 Through formal interview of the most promising applicants, other characteristics of the
applicants may be revealed or observed by the supervisor/man- ager or panel
interviewers.
6. Verifying information provided by the applicant
 To make sure that the applicant has not given false information about himself or herself,
verification is necessary.
7. Requesting the applicant to undergo psychological and physical examination
 Having a healthy mind and a healthy body are important for good job performance.
8. Informing the applicant that he or she has been chosen for the position applied for
 Informing the applicant may be done verbally or in writing by the managers who give the
final decision regarding the applicant's hiring.

Steps in hiring employees effectively:

Interviews are important in determining the qualifications of an applicant and gauging his or her
ability to perform a job. Interviews may come in different forms.

Types of Job Interviews

 Patterned, Structured, Guided interview- the interviewer asks the applicant to answer
a set of prepared questions situational, job knowledge, job simulation, and worker
requirement questions
  Unstructured interview- the interviewer has no interview guide and may ask questions
freely
 One-on-one interview- one interviewer is assigned to interview the applicant
 Panel interview- several interviewers or a panel interviewer may con- duct the interview
of applicants; three to five interviewers take turns in asking questions.
Similarly, there are different kinds of employment tests administered to measure or test an
applicant's specific skill or capacity.

Types of Employment Tests

 Intelligence test- designed to measure the applicant's mental capacity: tests his or her
cognitive capacity, speed of thinking, and ability to see relationships in problematic
situations
 Proficiency and aptitude tests- tests his or her present skills and potential for learning
other skills
 Personality tests- designed to reveal the applicant's personal characteristics and ability to
relate with others
 Vocational tests- tests to show the occupation best suited to applicant.

TRAINING AND DEVELOPMENT

Training of Employees
 Training of employees takes place after orientation takes place.
 Training is the process of enhancing the skills, capabilities and knowledge of employees
for doing a particular job.
 Training process molds the thinking of employees and leads to quality performance of
employees.
 It is continuous and never ending in nature.
 Training is a program that helps employees learn specific knowledge or skills to improve
performance in their current roles.
 Development is more expansive and focuses on employee growth and future
performance, rather than an immediate job role.

Conducting the Training Needs Assessment

 It is done systematically in order to ascertain if there really is a need for training.
 Manager must first try to observe the business condition and the economic, strategic, and
technological changes that happening in the organization’s environment before
proceeding to the organization, task, and person.

Designing the Training Program

 This phase involves the stating of the instructional objectives that describe the
knowledge, skills, and attitudes that have to be acquired or enhanced to be able to
perform well.
 These are performance-centered objectives that must be aligned with the firm’s
objectives.
Implementing the Training Program
 Types of training program implementation includes:
o On-the-job training
o Apprenticeship training
o Classroom instruction
o Audio-visual method
o Simulation method
o E-learning

Evaluating the Training

 It may be seen by assessing the participants’ reactions, their acquired learnings, and their
behavior after completing the said training.

Employee Development
 It is a part of an organization’s career management program and its goal is to match the
individual’s development needs with the needs of the organization.

WEEK 5
C. Let’s Clarify Things

FUNCTIONS AND IMPORTANCE OF COMPENSATION/WAGES AND

PERFORMANCE EVALUATION

Definition of Terms
Compensation/wages
 all forms of pay given by employers to their employees for the performance of their
job.
Performance Evaluation
 a process undertaken by the organization, usually done once a year, designed to
measure employees’ work performance.

TYPES OF COMPENSATION
Direct compensation
 includes workers’ salaries, incentive pays, bonuses and commissions.
Indirect compensation
 includes benefits given by employees other than financial remuneration
 Example: travel, educational and health benefits, and others
Nonfinancial compensation
 includes recognition programs, being assigned to rewarding jobs, or enjoying
management support, ideal work environment, and convenient work hours.

CONNECTING COMPENSATION TO ORGANIZATIONAL OBJECTIVES

  Pay Equity is among the important consideration in preparing compensation package.
 As illustrated in this diagram, pay equity is based on the idea that an employee’s pay
must be commensurate to his or her effort.

EFFORT PAY

COMPENSATION: A MOTIVATIONAL FACTORS FOR EMPLOYEES

Compensation
 pay represents a reward that an employee receives for good performance that
contributes to the company’s success.

In relation to this, the following must be considered:

Pay Equity
 related to fairness
 the Equity Theory is a motivation theory focusing on employees’ response to the
pay that they receive and the feeling that they receive less or more than they
deserve.
Expectancy Theory
 predicts that employees are motivated to work well because of the attractiveness
of the rewards or benefits that they may possibly receive from a job assignment.

Bases for Compensation

Employees may be compensated on the following bases:
1. Piecework basis- when pay is computed according to the number of units produced.
2. Hourly basis- when pay is computed according to the number of hours rendered.
3. Daily basis- when pay is computed according to the number of days rendered.
4. Weekly basis- when pay is computed according to the number of weeks rendered.
5. Monthly basis- when pay is computed according to the number of months rendered.

Internal Factors
 are the organizations compensation policies, the importance of the job, the employee’s
qualifications in meeting the job requirements, and the employer’s financial stability.

External Factors
 include local and global market conditions, labor supply, area/ regional wages, cost of
living, collective bargaining, and national and international laws.

PURPOSES OF PERFORMANCE EVALUTION: ADMINISTRATIVE AND

DEVELOPMENT
  There are other purposes behind employee assessment that are beneficial to both the
company and the employees, these are:

Administrative Purposes
 these are fulfilled thought appraisal/evaluation programs that provide information that
may be used as basis for compensation decisions, promotions, transfers and terminations.
Development Purposes
 these are fulfilled thought appraisal/evaluation programs that provide information about
employees’ performance and their strength and weakness that may be used as basis for
identifying their training and development needs.

Different performance appraisal methods are used depending on the information an evaluator
aims to find out.

PERFORMANCE APPRAISAL METHODS

Methods of evaluating workers have undergone development in order to adapt new legal
employment requirements and technical changes. Some appraisal methods in use today are the
following:

 Trait methods- performance evaluation method designed to find out if the employee
possesses important work characteristics such as conscientiousness, creativity, emotional
stability, and others.
 Graphic rating scales- performance appraisal method where each characteristic to be
evaluated is represented by a scale on which the evaluator or rater indicates the degree to
which an employee possesses that characteristic.
 Forced-choice method- performance evaluation that requires the rater to choose from
two statements purposely designed to distinguish between positive or negative
performance.
Example: Works seriously- works fast; show leadership- has initiative.
 Behaviorally anchored rating scales (BARS)- a behavioral approach to performance
appraisal that includes five to ten vertical scales, one for each important strategy for
doing the job and numbered according to its importance.
 Behavior observation scales (BOS)- a behavioral approach to performance appraisal
that measures the frequency of observed behavior.

WEEK 6
C. Let’s Clarify Things

FUNCTIONS AND IMPORTANCE OF EMPLOYEE RELATIONS, EMPLOYEE

MOVEMENT & REWARDS SYSTEM

EMPLOYEE RELATIONS
 The connection created among employees/workers as they go about their assigned tasks
for the organization to which they belong.
Effective Employer Relations and Social Support
 Social support is the sum total of perceived assistance or benefits that may result from
effective social employee relationships.
 The quantity and quality of an employee’s relationship with others determine social
support (esteem support, informational support, or financial support)

Below are some barriers to good employee relations.

 Anti-social personality; refusal to share more about oneself to co-employees; being loner
 Lack of trust in others
 Selfish attitude; too many self-serving motives
 Lack of good self-esteem
 Not a team player
 Being conceited
 Cultural/subcultural differences
 Lack of cooperation
 Communication problems; refusal to listen to what others seek to communicate
 Lack of concern for others’ welfare

Here are ways to overcome barriers to good employee relations:

 Develop a healthy personality to overcome negative attitudes and behavior
 Find time to socialize with coworkers.
 Overcome tendencies to be too dependent on electronic gadgets.
 Develop good communication skills and be open to others’ opinions.
 Minimize cultural/subcultural tension.

EMPLOYEE MOVEMENTS
 Series of action initiated by employee groups tending toward an end or specific goal.

Employees/workers unionize because of financial needs, unfair management practices, or social

and leadership concerns.
a. Financial needs- complains regarding wages or salaries and benefits given to them by
the management are the usual reason why employees join labor unions.
b. Unfair management practices- perceptions of employees regarding unfair or biased
managerial actions are also reasons why they join mass movement.
Example: Lack of fairness in management are favoritism related to promotion and giving
of training opportunities and exemption from disciplinary action.
c. Social and leadership concern- some join unions for the satisfaction of their need for
affiliation with a group and for the prestige associated with coworkers’ recognition of
one’s leadership qualities.

REWARDS SYSTEM
Reward
  is something given or done in return, especially in the form of salary, a gift, prize,
incentive pay, benefits, or recompense for merit, service or achievement, and which may
have a motivating effect on the employee.
 Organizations offer competitive rewards systems to attract knowledgeable and skilled
people and to keep them motivated and satisfied once they are employed in their firm.
 Further, rewards promote personal growth and development and present fast employee
turnover.

MANAGEMENTS OFFER DIFFERENT TYPES OF REWARDS:

Monetary Rewards - rewards which pertain to money, finance, or currency.

a. Pay/salary
 financial remuneration given in exchange for work performance that will
help the organization attain its goals.
Examples: weekly, monthly, or hourly pay, piecework
compensation, etc.
b. Benefits
 indirect forms of compensation given to employees/workers for the
purpose of improving the quality of their work and personal lives
 health care benefits, retirement benefits, educational benefits, and others
are examples of these
c. incentives
 rewards that are based upon a pay-for-performance philosophy.
 It establishes a baseline performance level that employees or groups of
employees must reach in order to be given such reward or payment
Examples: bonuses, merit pay, sales incentives, etc.
d. Executive pays
 a compensation package for executives of organizations which consists
of
five components: basic salary, bonuses, stock plans, benefits, and perquisites
e. Stock options
 are plans that grant employees the right to buy a specific number of
shares of the organization's stock at a guaranteed price during a
selected period of time.

Nonmonetary Rewards - rewards which do not pertain to money. finance, or currency;

refer to intrinsic rewards that are self-granted and which have a positive psychological effect on
the employee who receives them.
a) Award
 nonmonetary reward that may be given to individual employees or
groups/teams for meritorious service or outstanding performance
 trophies, medals, or certificates of recognition may be given instead of
cash or extrinsic rewards
b) Praise
  a form of nonmonetary, intrinsic reward given by super to their
subordinates when they express oral or verbal appreciation excellent job
performance.

Intrinsic rewards
 Intrinsic rewards are the non-physical rewards. They cannot be seen or touched but are
emotionally connected with the employees. In other words, intrinsic rewards can be
defined as the feeling of contentment one finds in the completion of any task.

Different people have different perception and therefore, there are various forms of intrinsic
rewards, some of which are:
a) Sense of achievement
 It takes lots of efforts, skills, and courage to perform any task and there is no
better feeling than the joy one feels seeing his hard work pay off.

b) Words of praise from the seniors

 Employees become more than happy when their seniors or supervisors speak few
words of appreciation for them in front of peers or co-workers.

c) Recognition
 Everyone wants to be renowned at the place where they work.
 It is rewarding for employees when they are recognized by the co-workers and
other members of the company for the work they’ve done.
 If implemented properly, employee recognition can benefit both employer and
employees more than any monetary rewards.

Extrinsic rewards
 Extrinsic rewards are the physical ones that come from an external source (employers)
only.
 A properly designed extrinsic reward can also be emotionally attached with the
employees as employees value such rewards.
 An extrinsic reward is also directly related to the job performance of the employees but it
is not necessary that employees receive a reward every time they accomplish a task. It
depends upon the policy of the company.
There are various ways a company can choose to reward its employees. Some examples of
extrinsic rewards are:
a) Pay
 A company can design good payment for the employees as the reward for
contributing their precious time and energy in achieving the organization’s goal.
 A good payment is motivational and is a major factor that affects job satisfaction.
b) Bonus or commission
 When a company earns profit due to the effort of an individual or group of
employees, the company should appreciate their contribution by giving them
additional payment as a bonus or commission.
 Financial rewards are always known to have received more value from the
employees.
c) Improved working condition
 An employee spends a lot of time at the workplace, completing tasks of the
company and for the company.
 A company must acknowledge such attribution and reward its employees by
providing a comfortable workspace.

END OF ORGMA REVIEWER Q2

 BUSMATH REVIEWER Q2

WEEK 1
C. Let’s Clarify Things!
Determining Breakeven
In the previous lesson’s example, Andres has to sell more than 57 shirts to earn profit. If
he sells fewer than 57, he would incur a loss. What if he sells exactly 57 shirts? In this case,
Andres neither earns a profit nor incurs a loss. That is, his profit/loss is 0, and he is said to be in

A business is in breakeven if the total revenue generated is equal to the total cost incurred. The number of
items that needs to be sold to attain this is called the breakeven point.
breakeven.
Similarly, breakeven points could also refer to the amount of revenue required to attain a
profit/loss of 0. That is, instead of expressing it in terms of number of sales, the breakeven point
could be expressed in terms of its monetary equivalent.

Example 1:
A company sells tablets for ₱4,300.00. If the cost to produce one tablet is ₱3,100.00, and
the company has a total fixed cost of ₱36,000, determine the company’s breakeven point.

Solution:
Let x be the number of tablets sold. Then,
Revenue = Cost
4,300x = 3,100x + 36,000
1,200x = 36,000
x = 30
Thus, the breakeven point is 30 tablets.

Example 2:
The total cost and the total revenue (in hundreds of pesos) for the production and sale of
x watches are given, respectively, by
C( x ) = 15x + 600
R( x ) = 25x
a. Find the profit function P(x)
b. Find the breakeven point(s)

Solution:
Recall that x is the number of watches, R(x) is the revenue function and C(x) is the cost
function.
a. To find the profit function,
Profit = Revenue – Cost
P(x) = R(x) – C(x)
= 25x – (15x + 600)
= 10x – 600
 b. Breakeven point(s) are the value(s) of x such that P(x) = 0. Thus,
P(x) = 0
10x – 600 = 0
10x = 600
x = 60
Thus, the breakeven point is 60 watches.
For business to avoid incurring losses, it should be (1) have the unit price greater that the
unit cost; and (2) at least reach the breakeven point

Recall that a problem about Samuel’s price of his breaded pork chop meals was introduce
in the markup and mark down lesson. To determine if Samuel will make a profit, we will
compare the unit price and the unit cost per serving of his breaded pork chop meal.
We first obtain the net price for each of the ingredients for his pork chop meals. The
complement rate is 100% - 10% = 90%, or 0.90. Thus, the net prices are as follows:
Ingredient Net Price
Pork chop (0.90)(10.00) = ₱9.00 per piece
Sack of rice (0.90)(1,750.00) = ₱1,575.00
Pack of gravy (0.90)(150.00) = ₱135.00
We can now compute the cost per serving. Since each kilogram produces eight servings,
and each sack of rice weighs 50kg, each sack can produce a total of 400 servings. Also, the pack
of gravy is good for all 70 servings during a day.
We can, therefore, summarize the cost per serving as follows:
Ingredient Cost per serving
Pork chop ₱9.00
Sack of rice ₱ 1,575.00
=₱ 3.94
400

Pack of gravy ₱ 135.00

=₱ 1.93
70

Thus, each serving of pork chop would cost Samuel

9.00 + 3.94 + 1.93 = ₱14.87
Recall that Selling Price = Cost × (1 + Markup rate). Since Samuel wants to have a
markup rate of 125%, the selling price per serving is
14.87(1 + 1.25) = ₱33. 46.
However, he still has his other costs, namely salaries, rent, permits, and other fees. The
corresponding costs per serving are computed as follows:
Cost Cost per serving
Salaries 630
=₱ 9.00
70

Rents, permits, and 10,500

=₱ 525.00 per school day, which gives
other fees 20
 525
=₱ 7.50 per serving
70

Adding up all the costs (for the ingredients, salaries, rent, permits, and other fees), the
unit cost per serving is thus
14.87 + 9.00 + 7.50 = ₱31.37.
This is smaller than the unit price of ₱33. 46 per serving. Thus, based on the given
conditions, Samuel will be making a (small) profit from his business.

WEEK 2

C. Let’s Clarify Things.

Whenever calculations involving interest are made, we need to identify three main
components: the principal, the interest rate, and the time. We define each component below.
 Principal is the amount of money borrowed by the borrower (or lent by the lender); it
also represent the amount still owed on a loan. Principal is usually denoted by the letter P.
 Interest rate is the rate at which interest is calculated \, and is usually expressed as a
percentage of the principal. The interest rate is usually denoted by r.
 Time involved in interest calculation pertains to the term or life of the loan. This specifies
how long the debt must be paid by the lender. Time is usually denoted by t.
Consider the problem:
October last year, Carl borrowed an amount of ₱200,000 from PQR Cooperative at an
interest rate of 2% to finance his house renovation. How much is the interest if his due date is
October next year?
Most businesses and people acquire assets without paying its full cost at the time
purchase. The seller may then charge the buyer for this privilege. The amount charge for such a
privilege is called interest. In the loan made by Carl, we compute for loan interest as follows:

Given:
P = ₱200,000
r = 2% or 0.02
t = 1 year
Solution:
I = Prt
= 200,000(0.02)(1)
= ₱4,000

The amount of money ₱200,000 which was borrowed from the cooperative is called the
principal P, and the interest charged, I = ₱4,000, is a percent of principal. The period of time
where the lender or creditor will charge the interest starting from the loan date repayment date is

Interest is the percent of the amount of credit extended. In loans, it may be treated as an expense on the part of
the borrower or debtor and may be viewed as an income on the part of the lender or creditor. Short-term and
long-term credits or transactions are commonly offered by banks or any credit companies. Short-credits are
credits good for one day or up to one year, while long term credits are those for longer than one year. To
compute the simple interest, we use I = Prt.
called loan term or interest period, t, which is 1 year in the problem and quoted percent in the
rate 2%, which is r.

Suppose the term of the loan is stated as a certain number of days, we may divide the
number of days by 365 or 360. When the divisor is 360, we are applying ordinary interest, which
is still used by many businesses. The banks and other credit unions use the exact interest, in
which 365 is used as a divisor.
Lenders charge interest on the amount of money that the borrower owes, which is the
principal. The loan most of the time requires to be paid in regular monthly payments. It may or
may not be equal every month. When the borrower pays all of the interest for a particular month
and also pays a portion of the principal, the amount of the principal that has not yet been paid is
called unpaid balance.

Example 1:
Compute for the interest on a credit purchase of ₱30,000 at 8% for 10 and 15 months
Solution:
Interest for 10 months: Interest for 15 months:
I = Prt I = Prt
10 15
= 30,000(0.08)( ) = 2000 = 30,000(0.08)( ) = 3000
12 12

Example 2:
Francis wants to know which credit company offers lower interest at the same interest
rate of 9% if he plans to borrow a quick cash of ₱30 000 for 90 days. Company A uses the
ordinary interest method to compute for the interest while Company B applies exact interest
method. Which company will he choose? What is the difference between the interests offered by
the two companies?

Solution:
In ordinary interest, I = Prt
90
= 30,000 (0.09) ( ¿
360
= 675
In exact interest, I = Prt
90
= 30,000 (0.09) ( ¿
365
= 665.75
In the previous example, the advantage of 365-day year offered by Company B that is
more realistic and financially better for the borrower since the interest are smaller under the same
interest rates. He could save an amount of 675 – 666.75 = ₱9.25 if he borrowed the money from
Company B instead of borrowing if from Company A.

Example 3:
Convert each rate.
a. 15% per year to the equivalent monthly rate
b. 1.5% per monthly to the equivalent annual rate.
Solution:
a. Divide the annual rate by 12 to obtain
15 ÷ 12 = 1.25% monthly
b. Multiply the monthly rate by 12 to get
1.5 × 12 = 18% annually

Many people use credit card to purchase goods or services for them to attain quick
possession or immediate service, but delay the payment. In credit cards, an interest charge is
normally offered. The finance charges on the unpaid balance each month is the general concept
of charging for credit purchases.
Example 4:
Elena wants to use her credit card to buy ₱10,000 worth of items payable in 10 months at
15% per year on an annual and a monthly basis.
Solution:
Using I = Prt, the principal P can be treated as the unpaid balance. However, t is
expressed in months and r is now the monthly rate.
The interest on an annual basis is computed as follows:
10
I = Prt = 10,000 (0.15) = 1250
12
On a monthly basis, the interest may be computed as,
r = 15(annually) ÷ 12 = 1.25% monthly
I = Prt = 10,000 (0.0125) = 125
Note that single payment simple interest which is a direct method of computing interest
on loans over a short period of time is applied.

Example 5:
Last month, Philip borrowed ₱20,000 at 10% interest rate. He repaid the loan in three
monthly payments. If he wanted to pay ₱6,750 the following 2 months and pay the remaining
balance on the third month, compute the ordinary interest (with 360-day year) using unpaid-
balance method.

Solution:
Illustrated in the next example is a common practice in borrowing business. Here, the
objective is to compute for simple interest on unpaid balance.
To compute for the interest using the unpaid-balance method, we follow the following
steps:
Step 1: determine the values of P, r, and t.
Step 2: calculate the interest payment for the month.
Step 3: subtract the interest payment from the total monthly payment to compute for the principal
payment.
Step 4: subtract the principal payment from the previous unpaid balance to get the new unpaid
balance.
Step 5: repeat steps 1 to 4 until the last month. To compute for the total payment for the last
month, add the interest due to the unpaid balance.

First month computations

 30
I = Prt = 20,000 (0.10)( ) = ₱164.38
360
Amount paid on principal: 6,750 – 164.38 = ₱6,585.62.
From the loan of ₱20,000, the new unpaid balance is now
20,000 – 6,585.62 = ₱13,414.38

Second month computations

30
I = Prt = 13,414.38 (0.10) = 110.26
360
This time, the amount paid on principal is,
6750 – 110.26 = 6,639.74
13,414.38 – 6,639.74 = ₱6,675.64

Last month computations

30
The unpaid balance is now ₱6,675.64, with the same rate of 10% and t =
365
I = Prt
30
= 6,675.64(0.10) = 54.87
365
Philip has to pay 6,675.74 + 54.87 = ₱6,730.51
Thus, the amount paid on the principal is now ₱6,730.51.

In credit sale, the customer may pay the purchase price and credit charges in monthly
payments called installments. It may be computed just once on the principal or it may be
computed monthly on the unpaid balance.

Example 6:
Anica bought perfume using a credit card at a price of ₱2,400 payable in four months at
15%. The principal is also repaid equally each month with four payments of ₱600 each. Compute
for the total interest when it is paid equally over four months.

Solution:
Since, I = Prt
4
= 2,400(0.15)( ) = ₱120
12
Thus, the total interest is ₱120.
120 ÷ 4 = ₱30 per month for interest.

The summary of all computations is presented by the table below:

MONTH UNPAID MONTHLY PRINCIPAL TOTAL NEW
BALANCE INTEREST PAYMENT PAYMENT BALANCE
2 1,800 30 600 630 1200
3 1,200 30 600 630 600
4 600 30 600 630 0
TOTAL 120 2,400 2,520
Example 7:
Consider Example 6. Suppose instead, the interest is computed on the unpaid balance
each month, calculate the total interest on Anica’s purchases. Assume that the principal is still
repaid 600 per month for four months.
Computing the equivalent monthly interest of 15% per year, we obtain 15% ÷ 12 =
1.25% per month.
Computations may be summarized as follows:
1ST MONTH 2,400 (0.0125) = ₱30
2ND MONTH 1,800 (0.0125) = ₱22.5
RD
3 MONTH 1,200 (0.0125) = ₱15
TH
4 MONTH 600 (0.0125) = ₱7.50

Computations may be summarized as follows:

MONTH UNPAID MONTHLY PRINCIPAL TOTAL NEW
BALANCE INTEREST PAYMENT PAYMENT BALANCE
1 2,400 30 600 630 1800
2 1,800 22.5 600 622.5 1200
3 1,200 15 600 615 600
4 600 7.5 600 607.5 0
TOTAL 75 2,400 2,475
Example 8:
Seth invested ₱6,000 in two bank accounts. One of the accounts pays 8% interest per
year, and the other account pays 10% interest per year. If the total interest earned on the
investment is ₱560 after one year, how much money was invested in each account?

Solution:
Given: Let P be the principal invested at 8%
6,000 – P be the principal invested at 10%
The total principal invested was ₱6,000
The total interest earned was ₱560.
Computations may be summarized as follows:

MONEY AT 8% MONEY AT 10% TOTAL

PRINCIPAL P 6,000 – P ₱6,000
INTEREST 0.08(P) 0.1(6,000 – P) ₱560

Since the total interest is equal to the sum of the interest on the first and second account,
we can write
0.08(P) + 0.10 (6,000 – P) = 560
0.08(P) + 600 – 0.10(P) = 560
-0.02(P) = 560 – 600
-0.02(P) = -40
P = 2,000, the principal invested on the first account
Hence, 6,000 – 2,000 = ₱4,000, the principal invested on the second account.
 WEEK 3
C. Let’s Clarify Things!
Employees who receives piece-rate compensation are paid according to the number of
items they produce. This mode of payment does not work for individuals (employees or
independent sales agents) tasked to sell manufactured products – individuals who may not be
involved in the production process. They are instead paid in accordance with the number of items
they sell or their total sales (the total amount of money they acquire by selling). The payments
A commission is a payment made to an individual or firm for the sale of goods. The entity this individual or
firm acts on behalf of its called principal.

they receive are called commissions.

Individuals who receive commissions are not necessarily independent of the firm for
which they are selling goods. Many firms have their own employees who focus on selling
products. Their salaries are often commission-based to incentivize and improve their efforts to
sell goods to consumers.
This focuses on the different modes of commission-based compensation for employees.
These modes are straight commission, graduated commission, salary plus commission, salary
plus bonus, and overriding commission.

Straight Commission
An employee paid by straight commission does not receive a regular monthly salary.
His/her pay for any particular time period depends on one of two different pairs of factor:
a. Number of items sold and commission per item: the amount acquired for every item sold
is the commission rate. If N is the number of items an employee sells and r is the
commission rate, then the commission C he/she acquires under this setup is
C = Nr
Example 1:
Hilda works as a saleswoman in an appliance store. She gets ₱135.00 for every electric
fan she sells. How much is her commission for April if the store managed to sell 120 electric
fans in April?

Solution:
Note that N = 120 and r = ₱135.00. We have
C = Nr
= 12(₱135.00)
= ₱16,200.00
b. Total sales and percentage commission: the commission rate in this case is given as
percentage, and the rate is applied on the employee’s total sales S, not the number of
items sold. the commission C acquired by the employee under this setup is
C = Sr
Example 2:
 In May, the store’s management changes the basis for Hilda’s commission. The pay she
is to receive will be 14% of her total sales. If she once again sells 135 electric fans, and each
electric fan is sold for ₱850.00, how much will her commission in May be?

Solution:
Based on the problem, we have r= 14%. It follows that S = ₱850 (135) = ₱114,750.00.
Thus,
C = Sr
= ₱114,750.00 (14%)
= ₱16,065.00

Graduated Commission
A firm can further incentivize an employee’s efforts to increase sales by introducing
graduated commission rates – that is, different rates that are applicable for different sales levels.
The higher the sales are, the greater the commission rate, that is, as an employee sells more,
hi/her commission gets higher. The higher the sales are, the greater is the commission rate.

Example 3:
Gemma sells a particular type of lotion for Skinnutrition, Inc. The applicable commission
rates are 6% for sales up to ₱150,000.00; 9% for the next ₱100,000.00; and 18% for sales
beyond ₱250,000.00. How much will her commission be if her sales amount to the following?
a. ₱90,000.00
b. ₱190,000.00
c. ₱275,000.00
Solution:
For the three subitems, let Gemma’s total commission be:
a. Since ₱90,000 < ₱150,000, the commission rate is 6% for all of Gemma’s sales.
C = ₱90,000 (6%)
= ₱5,400.
b. Gemma’s sales are ₱190,000 - ₱150,000 = ₱40,000 above ₱150,000
For the first ₱150,000.00, the commission rate is 6%. For the remaining ₱40,000.00, the
commission rate is 9%. Thus,
C = ₱150,000 (6%) + ₱40,000 (9%)
= ₱12,600.00
c. Gemma’s sales are ₱275,000 - ₱250,000 = ₱25,000 above ₱250,000.
For the first ₱150,000.00, the commission rate is 6%. For the next ₱100,000.00, the commission
rate is 9%. For the remaining ₱25,000.00, the commission rate is 18%. Thus,

C = ₱150,000 (6%) + ₱100,000 (9%) + ₱25,000 (18%)

= ₱22,500.00

Salary Plus Commission

An employee may receive a regular salary and a commission on top of it. Depending on
the employee’s arrangement with the firm, this commission may have to be computed using
graduated commission rates.
Example 4:
Caloy, a clerk at a motorcycle store, receives ₱7,500.00 a month in addition to 3% of the
month’s total motorcycle sales. If August’s sales amounted to ₱800,000.00, how much is Caloy’s
gross income in August?

Solution:
Caloy’s gross income can be calculated as follows:
Gross Income = ₱7,500 + ₱800,000 (3%)
= ₱31,500.00
Salary Plus Bonus
Employees tasked to focus on sales are often given quotas – sales levels they are
expected to meet in a particular time period. An employee who fails to meet his /her quota gets
basic salary only. One who exceeds it, on the other hand, is often given a bonus, which in most
cases is a percentage of sales beyond the quota.

Example 5:
Elmer is a real estate agent who has a yearly quota of ₱20,000,000.00. He receives a
monthly salary of ₱38,000.00 and a 5% bonus on sales in excess of his quota. How much will his
gross income be for this year if his annual sales amount to:
a. ₱17,500,000.00?
b. ₱29,750,000.00?

Solution:
Elmer’s gross income is the sum of his regular salary and commission.
a. Elmer fails to meet his quota. Thus, his gross income for the year is composed solely of
his regular salary.
Gross Income = ₱38,000.00 (12)
= ₱456,000.00
b. Elmer exceeds his quota by
₱29,750,000 - ₱20,000,000 = ₱9,750,000. Thus,
Gross Income = ₱38,000.00 (12) + ₱9,750,000 (5%)
= ₱943,000.00

Overriding Commission
An individual may be tasked to supervise a group of sales employees. In some firms, this
individual is paid an additional commission called an overriding commission (or simply
override) for sales made by the employees under him/her.

Example:
Henry is a junior officer at Commico, Inc., a company that manufactures and sells
network equipment. Besides working on increasing his own sales, he handles and advises a
number of employees. He earns a monthly salary ₱29,000.00 and is given 125 commission for
sales he makes and an additional3% for the sales of the employees under him. Suppose his sales
this month amount to ₱300,000.00 and the sales of the employees under him total ₱250,000.00,
a. How much is override?
b. How much is his total commission?
 c. What is his gross income?
Solution:
a. Override = ₱250,000 (3%)
= ₱7,500.00
b. Henry’s total commission is the sum of the commission he gets from his own sales and
his override.
Total Commission = ₱300,000 (12%) + ₱7,500
= ₱43, 500.00
c. Henry’s gross income is the sum of his total commission and his monthly salary.
Gross Income = ₱43, 500.00 + ₱29,000.00
= ₱72,500.00

WEEK 4
C. Let’s Clarify Things!
Employee compensation, whether monetary or non-monetary, serves as a primary, if not
the most important form of incentive to work. Employees are paid salaries or wages as a reward
for putting in work, and in turn, employees spend money on personal necessities or save some
for later consumption. Since labor is a major force that drives the domestic economy, employee
compensation plays a large role in maintaining the supply of labor hours present in the company.
Compensation, which is the umbrella term for salaries, wages, is defined by the National
Statistical Coordination Board (NSCB) as “remuneration in cash and in kind to employees at
regular intervals for time of work or work done.” The amount of compensation earned by an
employee is dependent on the nature, time, and location of work, among others. It is also
dependent on the company and its understanding with the employees’ union. Since there is a
large number of consideration when determining how much an employee should earn for his/her
work, a significant amount of legislation is dedicated to regulation how employers are to
compensate their employees. As a result, the government has instituted the minimum wage and
the provision of employee benefits, among others, to protect employees and to ensure that they
receive just compensation for their labor. The Department of Labor and Employment (DOLE)
and its affiliated agencies are in charge of upholding these labor laws and codes.
Monetary compensation can be of two kinds: salary or wage. Employees who earn on a
salary-basis are those who earn at a fixed rate that is quoted on a weekly, monthly, bimonthly, or
an annual basis. Since their compensation is fixed, salaries employees do not earn less if they
work less that the mandated number of hours or earn more if they work beyond the minimum
work hours. In other words, the number of hours a salaried employee works per day does not
affect his/her salary.
On the other hand, wages are quoted on an hourly basis, and the amount a wage-earner
receives at the end of a period is the number of hours worked multiplied by his hourly rate. Thus,
the amount a wage-earner receives at the end of the period is positively related to the number of
hours he/she works per day – the greater the number of hours worked within the day, the greater
the amount of pay received. However, the Labor Code of the Philippines states that employees
are only expected to work eight hours per day. Thus, if an employee works for more than the
mandated number of hours per day, the employee is entitled to what is called overtime pay, or
the additional compensation for work performed beyond eight hours per day. The computation of
the overtime pay will be shown in the succeeding lessons.
Aside from monetary compensation, employees are also granted the following benefits
and working conditions. Benefits are forms of compensation that are not monetary in nature.
Meanwhile, working conditions are the circumstances in the place of work that are expected to
be provided by the employer, as follows:
1. Work hours not exceeding eight hours per day;
2. Payment of overtime work (amounting to at least 25% of the employee’s regular wage) and
holiday pay;
3. Rest period of at least 24 consecutive hours for every six consecutive days of normal work;
4. For every year of service, an incentive leave of at least five days with pay;
5. Paternity and maternity leave;
6. Provision of medical or health insurance; and
7. Compensation and contributions to insurance funds such as the Social Security System (SSS)
or the Government Service Insurance System (GSIS).

Gross and Net Earnings

Whether the worker is a salaried worker or wage-earner, both are subject to computations
for gross earnings and net earnings. Gross income is the computed pay before the deduction of
income tax and other deductibles (e.g., contributions for insurance or social securities). Net
income, on the other hand, commonly known as the “take-home” pay, is the amount received by
the employee after all taxes have been withheld and all contributions have been deducted from
the gross earnings.
It is important to understand that when hiring is taking place, the salary or wage quoted to
the potential employee is oftentimes not the take-home pay; that is, when the employee receives
his/her paycheck, the amount given is less than the amount stipulated during the employment
agreement. This difference is largely due to the deductions made in the form of income taxes or
contributions to insurance.

Gross Earnings for Salaried Workers

The gross earnings of a salaried worker are often quoted on an annual basis. This annual
figure is the amount the employee earns per year. Salaries may be quoted on a different basis on
a different basis depending on the time period. Usually, companies pay their salaried workers on
a weekly basis, on a biweekly basis, on a monthly basis, on a semimonthly basis, or on a
bimonthly basis. Here, we note that biweekly and bimonthly mean every two weeks and every
two months, respectively. Likewise, semimonthly means every half-month. The common
conversion between weekly, monthly, and annual figures is carried out using the following table.

Table 1. Conversion Factors for Time Periods on Salary.

Period Equivalent Period
12 Months
52 Weeks
1 Year 24 “Half-month”
26 “Two-week” periods
(for biweekly payments)
 Therefore, given an annual salary figure (which denote by Sannual), we can obtain the
equivalent monthly, weekly, semiweekly, semimonthly, and biweekly salary by considering the
following conversion table.

Table 2. Summary of Conversion of Time Basis for Salaries

Description Notation Computation
S annual
Monthly Salary Smonthly
12

S annual S monthly
Semimonthly Salary Ssemimonthly
24 2

S annual
Weekly Salary Sweekly
52
S annual
Biweekly Salary Sbiweekly or 2 x Sweekly
26

Hourly rate for salaried workers may be computed. However, this hourly rate is devoid of
application since salaried employees are not compensated on an hourly basis. It is sometimes
done to compare salaries of different workers among the employees. However for comparative
purposes, it is often more meaningful to use the annual figure, since companies may vary in
terms of the number of work hours (i.e., some companies may have five 8-hour work days per
week, while others have six 8-hour work days per week).

Example 1.
A nationwide survey has determined that the average monthly salary of a high school
teacher is ₱25,600.00. On average, how much does a high school teacher earn in one year? In
one week? Every two weeks?

Solution:
The given amount is salary quoted on a monthly basis. In order to convert the salary to an
annual or a yearly figure, we multiply it by 12, since there are 12 months in a year:
Annual salary = ₱25,600.00 x 12 = ₱307,200.00

Based on our conversion table, the weekly salary is obtained by dividing the annual
figure by 52,
Weekly salary = ₱307,200.00 ÷ 52 ≈ ₱5,907.69

Finally, the salary obtained by dividing the annual salary by multiplying the weekly
salary by 2,
Biweekly = ₱5,907.69 x 2 = ₱11,815.38.

The same result is also obtained by dividing the annual salary by 26.
Usually, companies pay salaries twice a month –on the 15th day of the month and on the
th
30 day of the month. In such cases, semimonthly salaries are used as the gross pay.
Gross Earnings for Wage-Earners
Wage earners are compensated based on an hourly rate. Since the computation of wages
is based on the number of hours worked, it is important for employers of wage-earners to
accurately record the number of hours an employee puts in each day. To this end, the
management usually install machines called bundy clocks or time clocks which automatically
record the time-in and time-out of employees on their designated time cards.
A wage earner’s daily gross pay is decomposed into two components – the regular pay
and the overtime pay. The regular pay is the number of hours worked by the employee (less than
or equal to eight hours) multiplied by the applicable hourly rate.
Regular pay or basic pay is compensated calculated by multiplying the number of hours
worked by the employee (not exceeding eight hours) by the applicable hourly rate. This amount
is also referred to as the basic daily wage.
If W represents the total daily wage of an employee, h is the number of hours put in by
the employee that day, and r is the employee’s applicable hourly rate, then his daily regular wage
is computed as
W=h×r
Where 0 ≤ h ≤ 8. If h exceeds eight hours, then a special rate is applied to the number of hours in
excess of eight hours. This rate is called the overtime rate. The computation of overtime pay will
be discussed in the next section.

Example 2
Patrick is paid ₱450.00 per hour. His regular days of work are from Tuesday to Sunday.
Assuming that he worked eight hours per day last week, determine his daily gross pay.
Determine the amount he received in wages for the entire week.

Solution:
From the problem, we are given r = 450 and h =8. This daily wage is obtained by
multiplying his hourly rate by the number of hours he worked that day,

W = h × r = ₱450.00 × 8 = ₱3,600.00
Since he worked for six days in a week, the amount he received after the week is equal to his
daily wage multiplied by 6,
Weekly wage = ₱3,600.00 × 6 = ₱21,600.00
This assumes that no overtime work was performed.

Daily wages (based on an eight-hour working day) are mandated to be at least equal to
the daily minimum wage, as stipulated in the Wage Rationalization Act (Republic Act No.
6727). For the National Capital Region (NCR), the minimum daily wage is ₱491.00 for non-
agriculture workers and ₱454.00 for workers in the agricultural sector, private hospitals, retail or
service establishments, and manufacturing establishments. Wage rates vary from region to
region, industry to industry, and sector to sector.

Holiday Pay and Premium Pay

Holiday Pay
 The computation of daily wage changes depending on the date of work. As stated in the
Labor Code, employers are required to pay daily wage for any unworked regular holiday and to
provide a premium pay whenever an employee is required to work on regular holiday. Thus,
holiday pay refers to the compensation to which an employee is entitled for an unworked
holiday.

Here is the list of regular holidays declared in Executive Order No. 292.
Holiday Date
New Year’s Day January 1
Maundy Thursday Variable
Good Friday Variable
Araw ng Kagitingan April 9
Labor day May 1
Independence Day June 12
National Heroes’ Day Last Monday of August
Bonifacio Day November 30
Christmas Day December 25
Rizal Day December 30
Other days may be declared holiday by means of a proclamation, law, or order.
Additional holidays declared by the government within the year are called special holidays. Pay
received for work performed on special holidays follow a computation different from holiday
pay computations.
Employees covered by the Holiday Pay Rule are entitled to 100% of their basic daily
wage even if they do not report for work on the holiday, so as long as they are present or on a
leave of absence with pay on the work day immediately prior to the regular holiday. For a list of
employees covered by the Holiday Pay Rule, you are advised to consult the Labor Code of the
Philippines.
An employee who reports for work on a regular holiday is entitled to his/her basic wage
plus an additional amount that is at least equal to 100% of his/her basic daily wage. Suppose an
employee, whose basic daily wage is W works during a regular holiday. Then, the amount WH
the holiday pay she receives for that day of work is
WH = W + (100% × W) = 200% × W
In the equation above, the subscript H indicates that this is the daily wage earned during a
regular holiday. Thus, we call WH the holiday pay earned by the employee.

Example 3:
July reported for work from June 8 to June 31. On each day she worked eight hours
during her shift, for which she is paid ₱125.00 per hour. Determine the amount she received at
the end of the week.

Solution
June 12 is a regular holiday, so July should receive twice her daily wage on that day. The
remaining five days are ordinary work days. Her daily wage is given by
W = ₱125.00 × 8 = ₱1,000.00.
The wage earned for the five ordinary work days is ₱1,000.00. On the other hand, the
wage earned on June 12 is 200% of her daily wage, which is equivalent to twice her daily wage,
 WH = 200% × W = ₱2,000.00
Thus, the amount she received at the end of the week is ₱5,000.00 + ₱2,000.00 =
₱7,000.00

Premium Pay
As opposed to holiday pay, is the amount of compensation received for work within eight
hours on rest days and/or special holidays note that premium pay is different from holiday pay –
if an employee does not report for work on his/her rest day or on a special holiday, he/she does
not receive compensation
According to Executive Order No. 292, there are, by default, three special holiday in a
year.
Special Holiday Date
All Saints Day November 1
Last Day of the Year December 31
Similar to regular holidays, additional special holidays may be declared by the
government
An employee who performs eight hours of work on a rest day or on a special holiday is
entitled to an additional amount, called premium pay, equivalent to 30% of his/her basic daily
wage, on top of the amount he/she receives regularly that is, if W is the basic daily wage of an
employee and work is performed on a rest day or a special holiday, then the amount to be
received is
WP = W + (30% × W) = 150% ×W
Example 4:
Mary has five regular work days in a week. Last week, she was called in to work on a
special holiday that coincide with her rest day if she receives an hourly rate of ₱120.00,
determine her gross pay for that week assume that she worked eight hours each day she reported
for work

Solution
Out of five days she worked, four are ordinary working days for which she receives her
usual basic daily wage of W = ₱120.00 × 8 = ₱960. The amount she receives for working on the
special holiday (which is also her rest day) is 150% of her basic daily wage, which is WPR =
150% × ₱960.00 = ₱1,440.00 Thus, her gross income for the week is ₱960.00 × 4 + ₱1,440.00 =
₱5,280.00.
Now, suppose an employee reports for work on a regular holiday that coincides with
his/her rest day. Then, the employee receives a premium pay equivalent to 100% of his/her wage
with premium pay WP. let WPH denote the amount the employee receives for working on a
regular holiday that is also a rest day; then
WPH = WP + (100% × WP) = 200% × WP
But since WPH = 200% × (130% × W) = 260% × W
This computation does not cover employees who are outside the scope of the Holiday Pay Rule

Example 5:
Jennifer has six regular work days in a week. Last week, she reported for work on a
regular holiday that coincides with his /her rest day. If she receives an hourly rate of ₱175.00,
determine her gross pay for that week assuming she worked eight hours each day she reported
for work.

Solution
Her basic daily wage is W = ₱175.00 × 8 = ₱1,400.00 On the day that is both her rest day
and a regular holiday, the amount she receives is WPH = 260% × ₱1,400.00 = ₱3,640.00. Thus,
her gross pay for the week is
Gross pay = 5W + WPH = 5 × ₱1,400.00 + ₱3,640.00 = ₱10,640.00

Overtime Pay
In the previous section, it is shown that an employee is entitled to working conditions that
require him/her to work for eight hours a day only. For work done in excess of the required eight
hours, the employee in entitled to a special rate called the overtime rate. Overtime pay is the
compensation received for additional work done beyond eight hours.
Unlike holiday or premium pay, multipliers for overtime pay are not applied directly on
the basic daily wage, but on the applicable hourly rate of the employee. Let to denote the number
of overtime hours worked by the employee and ro be the applicable overtime rate. If an employee
works overtime, then the amount to be received by the employee at the end of the day is
W + Wo = W + (ro × to).
Here, Wo = ro × to is the amount the employee receives after rendering to hours of overtime
charged at ro per hour.
Recall that the basic daily wage is given by W = h × r, where h is the number of work
hours delivered (with 0≤h≤8) and r is the regular applicable rate. Supposing that the employee
works for h = 8 hours, then given his/her basic daily wage, we can compute his/her applicable
hourly rate,
W
r=
8
On ordinary working days (i.e., days that not holidays, special holidays, or rest days), the
employee is entitle to 25% more of his/her hourly rate; that is,
ro = r + (25% × r) = 125% × r
This is then the rate that is used to calculate the overtime pay Wo.

Example 6:
Nick’s regular working days are from Tuesday to Sunday last week, he rendered 56 hours
of work. If he is paid ₱315.00 per hour, determine his gross pay for the week.
Solution
Hours in excess of 48 hours are considered overtime work, so Nick rendered a total of
eight hours of overtime last week. His overtime rate is given by
ro = 125% × ₱315.00 = ₱393.75,
and his overtime pay amount to
Wo = ro × to = ₱393.75 × 8 = ₱3,1530.00
For the regular hours, he is paid ₱315.00 × 48 = ₱15,120.00. Therefore, his gross income for the
week is given by
₱15,120.00 + ₱3,1530.00 = ₱18,270.00
If overtime hours are rendered on a special holiday or on a rest day, then the overtime
rate will be 130% of the applicable hourly rate on the amount received for working on a special
or rest day, which we denoted earlier by WP. Hence, if rPO denotes the overtime pay on a special
or rest day, then we have
W 130 % ×W W
RPO = 130% × P = 130% × = (130%)2 × = (130%)2 × r
8 8 8

Example 7:
Darlene’s regular work schedule is for Monday to Saturday. Last week, she reported for
work on a Sunday, which is her rest day. For that week she rendered 70 hours of work, 10 of
which were rendered on Sunday. If her hourly rate ₱280.00, determine her gross pay for the
week.

Solution
For her work from Monday to Saturday (6 days), 48 hours are considered regular hours,
for which she will be paid her basic daily wage of W = ₱280.00 × 8 = ₱2,240.00 per day for the
six days. Thus, for her regular work, she is paid ₱2,240.00 × 6 = ₱13,440.00.

For her overtime work from Monday to Saturday, the application hourly rate is ro = 125%
× ₱280.00 = ₱350.00. The number of hours of overtime for this period is to = 70 – 10 – 48 = 12.
Thus, her overtime pay from Monday to Saturday totals to ₱350.00 × 12 = ₱4,200.00.
As for her work on Sunday, she rendered eight hours of work for which she earns 130%
of her basic daily wage. Furthermore, the two hours overtime rendered on Sunday corresponds to
compensation at an hourly rate of rPO = (130%)2 × ₱280 = ₱473.20. Her total pay for her work on
Sunday amounts to
130% × ₱2,240.00 + 2 × ₱473.20 = ₱3,858.40
Thus, her total gross pay for the week is the sum of her regular wage from Monday to
Saturday, her overtime pay from Monday to Saturday, and her pay for her work on Sunday
₱13,440 +₱4,200 + ₱3,858.40 = ₱21,498.40
Consider an employee who works overtime on a special holiday that coincides with
his/her rest day. Then, the overtime rate is given by 150% of the applicable hourly rate on the
amount received for working on a special or rest day, symbolized by WP. We denote by rPRO the
overtime rate earned for working overtime on a special holiday that coincides with a rest day.
This rate is given by
W
rPRO = 150% × P
8
130 % ×W
= 150% ×
8
W
= 150% × 130% ×
8
= 150% × 130% × r.
Example 8:
Suppose in example 7, Sunday was also declared a special holiday. How much would
Darlene then receive for the week?

Solution:
 With the added consideration, we have to recompute Darlene’s gross pay for Sunday. For
the first eight hours rendered on Sunday, she is entitled to 150% of her basic daily pay. So for the
first eight hours, she earns,
rPRO = 150% × (₱280.00 × 8) = ₱546.00,
and so the overtime pay for Sunday is 2 × ₱546.00 = ₱1,092.00. Thus, her gross pay for Sunday
is ₱3,360.00 + ₱1,092.00 = ₱4,452.00. Hence, her gross pay for the entire week is
₱13,440.00 + ₱4,200.00 + ₱4,452.00 = ₱22,092.00.
Suppose an employee, covered by the Holiday Pay Rule, works overtime on a regular
holiday. Then, the overtime rate merited by the employee is 130% of the applicable rate on the
amount earned while working for a holiday WH. We denote this overtime rate by rHO, and it is
given by
W
rHO = H
8
200 % ×W
= 130% ×
8
W
= 130% × 200% ×
8
This equation is equivalent to
rHO = 130% × 200% × r
where r is his basic hourly pay.
If the employee performs overtime work on a regular holiday pay that coincides with
his/her rest day, then his/her overtime rate is equivalent to 130% of the rate on the amount earned
during a regular holiday that overlaps with a rest day, denoted earlier by WPH. Hence, this
overtime rate rPHO is given by
W 260 % ×W W
rPHO = 130% × PH = 130% = 130% × 200% ×
8 8 8

Example 9:
Miguel’s normal working days are from Monday to Saturday. Last week, he worked 10
hours for each of the six days. Suppose Thursday of last week is a regular holiday. If he is paid
₱225.00 per hour, determine Miguel’s gross pay.

Solution:
For each of the five ordinary working days, Miguel is paid ₱225.00 × 8 = ₱1,800.00 for
the first eight hours, plus 125% × ₱225.00 × 2 = ₱562.50 for his two-hour overtime work.
For his work on Thursday, the first eight hours are compensated by 200% of his basic
daily wage (which is ₱1,800.00). Furthermore, the overtime rate applicable is given by
rHO = 130% × 200% × ₱225.00 = ×585.00.
This means that his overtime pay on Thursday amounted to ₱585 × 2 = ₱1,170. This pay
for Thursday is 200% × ₱1,800.00 + ₱1,170.00 = ₱4,470.00. His gross pay for the week is thus
5 × (₱1,800.00 + ₱562.50) + ₱4,470.00 = ₱16,582.50.

Piece-Rate Compensation
The scenarios and calculations in the previous sections assumed that employees are
compensated on the basis of the number of hours of work they rendered. In some industries or
sectors, workers are paid according to their output; that is, they are compensated on the basis of
how many units of output they produce. Each unit of output produced by a particular by a
particular employee is referred to as a piece. This type of compensation is known as piece-rate
compensation.
In compliance with minimum wage regulations, workers compensated on the basis of
output are to be paid an amount equivalent to the minimum wage associated to their region or
industry or sector work. In other words, their per-piece rate of compensation should result in
daily wage equivalent to the stipulated minimum wage.
There are two modes of piece rate compensation: Straight Piece Rate and Graduated
Piece Rate. For Straight Piece Rate mode, the rate paid per piece complete is constant; that is, the
incremental income from producing the third piece, for example, is the same as the incremental
income for producing the 1,000th piece. On the other hand, the Graduated Piece Rate mode
incentivizes the production of more pieces; that is, the rate per piece increases as the number of
pieces already produced increases.

Straight Piece Rate

As defined above, the rate under straight piece rate scheme stays constant regardless of
the number of pieces completed by an employee. The rate of income receive per piece complete
is called the standard rate per piece, and the gross income of a worker is computed as the
standard rate per piece multiplied by the number of pieces completed.
Gross Income = Rate Per Piece × Number of Pieces Completed

Example 10:
Elly is paid ₱75.00 for each fountain pen she assembles. If within the day, she is able to
assemble 60 pieces, how much is her gross pay for the day?

Solution:
Her rate per piece is ₱75.00, so her gross income is
Gross Pay = ₱75.00 × 60 pieces = ₱4,500.00

Graduated Piece Rate

Under the Graduated Piece Rate scheme, the rate of income per piece increases as the
number of pieces completed increases. For example, the first 10 pieces created by an employee
merits him/her ₱50.00per piece; producing the 11th to the 20thpiece pays ₱60.00 per piece; and
producing 21 or more pieces merits the employee ₱75.00 per piece. The overall gross income is
calculated by multiplying the number of pieces produced by the applicable per-piece rate. Thus,
the rate per piece gradually increases as the number of pieces produced increases. This acts as an
incentive for the employee to produce as many pieces as possible within the working day to earn
as much as possible.

Example 11:
Paula works in a factory that assembles gourmet boxed meals for airplanes. Her pay
system entails that she is paid ₱10.00 per piece for the 100 boxed meals she assembles, ₱15.00
per piece for assembling the 101st to 350th box, and ₱30.00 per piece in excess of 350 boxes.
Within the day, she was able to assemble 550 boxes. Determine her gross pay at the end of the
day.
Solution:
She will be paid ₱10.00 per box for 100 boxes, ₱15.00 per box for 250 boxes, and ₱30.00
for the remaining 200 boxes. Her gross pay is thus
Gross Pay = 100 × ₱10.00 + 250 × ₱15.00 + 200 × ₱30.00
= ₱10,750.00

WEEK 5
C. Let’s Clarify Things!
Consider the problem below:
Mr. Kiel has been working in Company A for four years, and then he transferred to
Company B. he noticed that when he compared the payslip he got, there are some differences. In
his previous employer, he sees the word “De minimis” while in his new employer, he sees word
“allowance” instead. So he asked himself, what could be the difference between the two? And
how does it affect the withholding tax? Here is a sample of his payslip (old and new).
We pick some information from both paylips, and summarize them below:
COMPANY A COMPANY B
Withholding tax ₱4,530.68 ₱9,865.00
De minimis ₱1,925.00
Living allowance ₱8,909.57

Total earning and deduction from old company

Earnings
Regular Pay: 18 382.35
De Minimis: 1 925.00
Perf Bonus: 560.00
BASIC PAY: 20 867.95
Overload-Coll: 1 769.50
ADJUSTMENTS: 6 748.88

Deductions
Withholding tax: 4 530.00
SSS Premium: 500.00
Philhealth: 250.00
Pag-Ibig Cont: 100.00
PAG-IBIG LOAN: 220.00
RETIREMENT FUND: 626.00
College Faculty Club: 30.00
Charges/Misc.: 360.00
Total earnings from new company
EARNINGS
Basic: 14 850.43 PREV. OL/EL:
Absences_BSC RLE-ALW:
:
LA/SFA: 8 909.57 OTH-ALW/HON:
Other Earn: Prev. RLE:
ABS_Allows: Prev. Basic:
TTL: 2 887.50 Prev. LA/SFA:
Holiday Pay: 4 400.00 :
OL/EL: 9 900.01 :
Total Earnings: 40 947.51

Total deductions from new company

DEDUCTIONS
Tax Whld: 9 865.38 Retloan:
SSS Premium: 581.30 :
PhilHlth: 437.50 :
Pag-Ibig: 100.00 :
SSS Ln: 692.17 :

Cash Adv.: :
Pag-Ibig Ln: :

Ret_Cont: :

Total Deductions: 11 676.35

Mr. Kiel knows that the computation for withholding tax does require some table
provided by the BIR (Bureau of Internal Revenue). So, the increase of withholding tax may be
due to the increase of the total earnings. The total earnings are composed of two different details,
the old one with the Performance Bonus and the De Minimis, while the New Living Allowance
(LA)/Special Financial Assistance. Mr. Kiel’s problem wants to understand if the additional
earnings has substantial contribution on the increase of tax.
To explain such dilemma, we consult the Revenue Regulation No. 5-2011. It is stipulated
in the said amendment, that the de minimis benefit should not be taxed with some constraints.
For example, uniform and clothing allowance not exceeding ₱4,000.00 shall not be taxed. It is
clear that in the old company, Mr. Kiel had worked for, the de minimis amounting to ₱1,925.00
is not taxed, while the living allowance in his new company contributed to the tax since the term
“living allowance” is no mentioned in the said amendment. Though we can consider living
allowance as a daily meal allowance, still it is said that exemption to tax for daily meal
allowance is only possible if the total sum of top-up earning is less than 25%.

Mr. Kiel’s problem is a bit more complex.

As stated in the Revenue Regulation No. 5-2011, the following benefits are not taxable
(De Minimis Benefits).
1. Monetized unused vacation leave credits of private employees not exceeding ten (10)
days during the year.
 2. Monetized value of vacation and sick leave credits paid to government official and
employees.
3. Medical cash allowance to dependents of employees, not exceeding ₱750 per employee
per semester or ₱125 per month.
4. Rice subsidy of ₱1,500 or one (1) sack of 50 kg rice per month amounting to not more
than ₱1,500.
5. Uniform and clothing allowance not exceeding ₱4,000 per annum.
6. Actual Medical Assistance, e.g. medical allowance to cover medical healthcare needs,
annual medical/executive check-up, maternity assistance, and routine consultations, not
exceeding ₱10,000 per annum.
7. Laundry allowance not exceeding ₱300 per month.
8. Employees achievement awards, e.g. for length of service or safety achievement, which
must be in the form of tangible personal property other than cash or gift certificate, with
an annual monetary value not exceeding ₱10,000 received by the employee under an
established plan which does not discriminate in favor of highly paid employees.
9. Gifts given during Christmas and major anniversary celebration not exceeding ₱5,000 per
employee per annum.
10. Daily meal allowance for overtime work and night/graveyard shift not exceeding twenty-
five percent (25%) of the basic minimum wage on a per region basis.
After identifying taxable benefits from not and knowing that tax is one of the standard
deductions, we now proceed on enumerating deductions in the payslips provided above. It can be
noticed in the following:
1. Withholding tax
2. SSS Premium
3. PhilHealth
4. PAG-IBIG
5. PAG-IBIG/SSS Loan
6. Retirement Fund
7. Charges/Miscellaneous
These are some standard deductions for a wage earner. Withholding tax is the amount
contributed by any wage earner to the government. The SSS (Social Security System) or GSIS
(Govn’t Services Insurance System, the equivalent government agency for SSS) collects
annual/quarterly/monthly contributions from its members to ensure that they will receive their
benefits. PhilHealth and Pag-Ibig are almost the same with SSS/GSIS only that PhilHealth
focuses more on providing discounts when it comes to health-related problems, while Pag-Ibig
Fund focuses on providing loans for lands or mortgages. Charges/Miscellaneous can be best
interpreted as deductions made by the employer for some other reasons. (e.g. tardiness/absence).

Example 1:
Mr. Faham is a government employee and has ten (10) days sick leave credits and seven
(7) days vacation leave credits. His daily rate is ₱525 and did not avail the sick and vacation
leave credits, so the agency monetized it. How much will be his additional earning and how
much of it will be taxed?
Solution:
For this problem, we have (10 +7) × 525 = 8,925.
Therefore, Mr. Faham will receive an additional earning of ₱8,925 and will not be taxed since he
is a government employee.

Example 2:
Ms. Emotin’s employer provides her employees an amount of ₱8,000.00 Christmas
Bonus. How much of the bonus is taxable? Considering that Ms. Emotin’s tax percentage is
25%, howhuch is her tax payable for the said bonus, and how much will be her net income from
the bonus?
Solution:
Since any amount exceeding ₱5,000 is taxable, then ₱8,000 ₋ ₱5,000 = ₱3,000. And
since her tax percentage is 0.25, then her tax is ₱3,000 × 0.25 = ₱750 and so, her additional
income is ₱8,000 ₋ ₱750 = ₱7,250.

Income taxes and the Computation of Net Income

The previous lessons illustrates how gross income is calculated. That is, the amount
obtained in the preceding exercises and examples are the amounts that the employee receives
prior to deductions. The deductions that an employee’s gross income is subject to vary
depending on the workplace and the employers. The mandatory deductions include monthly
withholding tax on income (referred to as income tax) and monthly contributions towards social
security and health insurance. Other deductions, such as company-specific contributions and
other fees may be carried out, but is subject to the collective agreement of the employees and the
employers. Other deductions include penalties for absences and/or tardiness for work and
contributions toward an employee’s union.
The employee’s payslip is a regular report that summarizes the computations for net
income. The payslip includes the gross income earned by the employee for the specified period
and the deductions made on the gross income to obtain the net income. After determining all
possible deductions in the employee’s earnings, his/her net income is given by

Net Income = Gross Income – Total Deductions

= Gross Income – (Income Tax + Social Security and Health Insurance Contributions
+ ….).

Income Tax
All residents, nonresidents, and local or foreign business entities and corporations who
receive income from sources within the Philippines are required to pay income taxes. These are
taxes levied on a person’s income or profits, practice of profession or conduct of trade or
business. Income taxes are called by the Bureau of Internal Revenue (BIR) as a means of
generating funds for the government activities and programs for the public. The time period
covered by each income tax return is called a fiscal year.
However, not all of a person’s income is used to compute for the amount of income tax to
be paid. Taxable income refers to the income items stated in the Tax Code less deductions due to
personal or additional exemptions. Their socioeconomic status and other personal criteria.
Table 1. Personal Exemptions from Income Taxes
Criteria Exemption per Fiscal Year
Single individuals or ₱50,000.00
married individuals who are
judicially decreed as legally
separated with no qualified
dependents
Head of the family ₱50,000.00
For each married individual ₱50,000.00

Additional exemptions include a deduction of ₱25,000.00 per fiscal year from taxable
income per qualified dependent. Individuals may claim additional exemptions for up to four
dependents.
Taxable income refers to the total gross income from all sources less personal and
additional exemptions as specified. In symbols,
Taxable Income = Gross Income – (Personal and Additional Exemptions).
That is, we consider income coming not only from compensation from services, but also
income from business, professional practice, rents, royalties, and the like. A more comprehensive
list of items included as taxable income can be found in the Tax Code.
Individuals who are minimum wage earners or those whose gross income does not
exceed his/her total personal and additional exemptions do not need to file income tax returns.
In this text, we will only discuss the computation of income taxes for individuals who
earn purely compensation income and individuals who engage in business or those who practice
their profession. Income taxes for larger entities such as business corporations will not be
discussed here.
Income taxes are computed by first identifying the tax bracket a particular taxpayer
belongs to. Tax brackets are identified using the total taxable income of the individual. Below is
the table that summarizes the tax rates applicable to individuals earning income from
compensation, business, and/or professional practice.

Table 2. Personal Exemptions from Income Taxes

Annual Taxable Income
Applicable Tax Rate
(in ₱)
below ₱10,000 5% of taxable income
₱10,000 up to ₱30,000 ₱500 + 10% of excess over ₱10,000
₱30,000 up to ₱70,000 ₱2,500 + 15% of excess over ₱30,000
₱70,000 up to ₱140,000 ₱8,500 + 20% of excess over ₱70,000
₱140,000 up to ₱250,000 ₱22,500 + 25% of excess over ₱140,000
₱250,000 up to ₱500,000 ₱50,000 + 30% of excess over ₱250,000
₱500,000 and above ₱125,000 + 32% of excess over ₱500,000

Note that except for the first tax bracket, each bracket has a rate consisting of a fixed tax
amount and a rate applied on the excess of the total taxable income over the bracket’s lower
bound. The calculation of income tax subject to the above tax rates is summarized using the
equation
Income Tax = Fixed Income tax + (Applicable Tax Rate)(Taxable Income – Bracket
Lower Bound)
 Income taxes are either paid as one files the Income Tax Return or through regular
withholdings from income. In the latter option, the employer deducts what is called withholding
tax from the regular compensation of the employee and pays the amount directly to the
government. In this practice, the employer shall also be in charge of filing the employee’s tax
returns every fiscal year.
Withholding tax is computed on a periodic basis (depending on the frequency of the
employee’s compensation) and is deducted from the taxable income computed for the same
period. Take for example an employee earning a semimonthly salary. This employee’s taxable
income for semimonthly withholding tax is his semimonthly gross income less deductions due to
social security contributions, health insurance contributions, absences, and tardiness.
The withholding tax deducted from the employee’s taxable income adheres to the rates
published by Bureau of Internal Revenue (Revised Withholding Tax Tables, effective January 1,
2009. The computation of withholding tax is similar to the computation of income tax payable
(see the equation for income tax) – that is, depending on personal status (single or married) and
the presence of dependents, a fixed amount plus a percentage of the excess of taxable income
over the lower bound stated in withholding tax table.
At the end of the fiscal year, the income tax payable by the individual is reduced by the
total withholding tax collected from the individual’s income throughout the year. If the annual
income tax is greater than the total withholding tax, then the individual must settle the balance by
paying the difference when filing his income tax return. Otherwise, if the total withholding tax is
greater than the annual income tax due, then there is an overpayment of income taxes, and so the
individual is entitled to a tax refund.
The table below may serve as a template for determining whether an employee has
balance to settle for income tax or is entitled to a tax refund due to overpayment of taxes.

Table 3. Summary of the Computation of Income Tax Payable/Overpayment of Income Taxes

Item Description
Annual Gross Income Regular pay + overtime pay + premium/holiday
pay; or annual salary. See previous lesson for
the computation of gross income
Less: SSS Contributions, Philhealth SSS and PhilHealth deductions are based on
Contribution, other Contributions, Penalties gross income. Rates are published on websites
for Late and Absences of the Social Security System and the
Philippine Health Insurance Corporation.
Details of its computations will not be covered
in this lesson.
Less: Personal and additional exemptions See table 1.
Taxable Income Annual gross income less deductions and
personal/additional exemptions
Income Tax Due Income tax computed using the taxable income;
see table 2.
Less: Total Withholding Tax Withholding tax collected by the employer
throughout the fiscal year.
Total Income Tax Payable Income tax due less total withholding tax. If
this value is positive, then that is the balance
 the individual must settle when filing the
income tax return. If it is negative, then its
absolute value represents the refund the
individual is entitled to.

Example 3:
Regine’s annual salary is ₱532,400.00. While she is single, she has two dependents
declared under her name. By the end of the fiscal year, her total withholding tax is ₱105,680.00.
Compute for her income tax payable at the end of the fiscal year.

Solution:
Since Regine is single, she is entitled to a personal exemption of ₱50,000.00 and an
additional exemption of ₱25,000 for each of her dependents. Thus, her taxable income is

Taxable Income = ₱532,400.00 – (₱50,000.00 + 2 × ₱25,000.00) = ₱432,400.00

Her taxable income falls under the second-to-last category stated in table 2. So her
income tax due is

Income tax = ₱50,000.00 +30% × (Taxable Income - ₱250,000.00)

= ₱50,000.00 +30% × (₱432,400.00 - ₱250,000.00)
= ₱104,720.00

Since her income tax due is less than her total withholding tax, she will be refunded the
difference, which is ₱105,680 - ₱104,720.00 = ₱960.00

Example 4:
Angge’s gross monthly salary amounts to ₱25,600.00 per month subject to the following
deductions: SSS contribution - ₱581.30, PhilHealth contribution- ₱312.50, PAG-IBIG
contribution - ₱100.00. Her withholding tax is ₱2,405.80 per month. Furthermore, she is married
with three dependents under her name. Determine her income tax due at the end of the fiscal
year.

Solution:
We first have to determine her annual gross income less deductions. On a monthly basis,
her gross salary deductions amount to:
Item Amount (₱)
Monthly salary 25,600.00
Less: SSS 581.30
Less: PhilHealth 312.50
Less: PAG-IBIG 100.00
Monthly Salary less deductions 24,606.20
 Thus, on an annual basis, her salary less deductions is ₱24,606.20 ×12 = ₱295,274.40.
Since she is married and has three dependents, her taxable income is

Taxable Income = ₱295,274.40 – (₱50,000.00 + 3 × ₱25,000.00)

= ₱170,274.40

This falls under the third-to-last category in table 2. So her income tax due at the end of
the fiscal year is

Income tax = ₱22,500.00 + 25% × (Taxable income − ₱140,000.00)

= ₱22,500 +25% × (₱170,274.40 − ₱140,000.00)
= ₱30,068.60

The total of all withholding taxes deducted from her monthly salary is ₱2,405.80 ×12 =
₱28,869.60, and so her income tax payable is

Income tax payable = Income tax – Total withholding tax

= ₱30,068.60 − ₱28,869.60
= ₱1,199.00

This means Angge has to pay the remaining balance of ₱1,199.00 at the end of the fiscal year.

END OF BUSMATH REVIEWER Q2