Carpetland salespersons average $8000 per week in sales. Steve Contois, the firm's vice president, proposes a compensation plan with new selling incentives. Steve hopes that the results of a trial selling period will enable him to conclude that the compensation plan increases the average sales per salesperson. a. Develop the appropriate null and alternative hypotheses. : : b. In this situation, a Type I error would occur if it was concluded that the new compensation plan provides a population mean weekly sales when in fact it does not. What are the consequences of making this error

Hypothesis Testing is used to check statistical significance of mathematical propositions. Null Hypothesis is a neutral, no difference stating hypothesis. Alternate Hypothesis is the hypothesis stating particular difference.

To study that 'compensation plan increases or not the average sales per salesperson'

Null Hypothesis [H0] = There is no impact of compensation plan on sales
Alternate Hypothesis [H1] = Compensation plan impacts in higher sales.

Type 1 Error is rejection of an actually true null hypothesis. In this case, it implies that compensation plan is concluded to impact in higher sales, when actually it has no impact on sales. The consequences might be that, the plan will be implemented because of the mis-conclusion. It might not be really useful in increasing sales thereafter.