Computation Method 4 (Modified Cumulative) - Multiple Breakpoints

The difference between this method and computation method 2 occurs only when multiple breakpoints exist. Rather than calculate the sales overage amount using the appropriate breakpoint percentage according to the breakpoint amount, the system always applies the percentage of the highest breakpoint amount that it uses. For example, if three percent is the breakpoint percentage associated with the highest breakpoint amount, after the system calculates the sales overage amount for the highest breakpoint, it continues to multiply the difference between the subsequent breakpoints by three percent.

Using the setup information for multiple breakpoints, the system calculates the sales overage (gross billing) amounts:

Period 01: 675.00

(15,000 + 1,000 – 500) × .05 − 100= 675.00

Period 02: 645.00

(35,000 + 1,000 − 20,000) × .04 = 640.00

The system uses four percent in the subsequent breakpoint calculations, because it is associated with the highest breakpoint amount used in the calculation.

(20,000 − 500) × .04 = 780.00

To derive the gross billing amount for the period, the system adds the sales overage amounts for both breakpoints, subtracts the prior gross billings, and then subtracts the recapture amount.

640.00 + 780.00 − 675.00 − 100.00 = 645.00

Period 03: 395.00

(60,000 + 1,000 − 40,000) × .03 = 630.00

The system uses three percent in the subsequent breakpoint calculations, because it is associated with the highest breakpoint amount used in the calculation.

(40,000 − 20,000) × .03 = 600.00(20,000 − 500) × .03 = 585.00

To derive the gross billing amount for the period, the system adds the sales overage amounts for both breakpoints, subtracts the prior gross billings, and then subtracts the recapture amount.

630.00 + 600.00 + 585.00 − 675.00 − 645.00− 100.00 = 395.00