Question

In: Statistics and Probability

Carpetland salespersons average $8000 in sales per week. Steve Contois, the firm’s vice president, proposes a...

Carpetland salespersons average $8000 in sales per week. 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 test whether the compensation plan would be effective. Before answering the following questions, you will need to first formulate the appropriate null and alternative hypotheses. a. What is the Type I error in this situation? What are the consequences of making this error? b. What is the Type II error in this situation? What are the consequences of making this error? c. Since there is money involved in the proposed plan, Steve would like to have a more stringent test by imposing a lower significance level. As a student of Statistics, do you think this is a good idea? Explain.

Solutions

Expert Solution

Steve hopes that the results of a trial selling period will enable him to test whether the compensation plan would be effective

This means that the alternate hypothesis in this case will be that the average is more than $8,000

So, we can write

(A) We know that type I error is rejecting the true null hypothesis. In this case, type I error will be the conclusion that average sales is increased or compensation plan is effective, when actually it is less than or equal to $8000 or the compensation plan is not effective. This will result in extra incentives to sales person who have low performance.  

(B) we know that type II error is failing to reject the false null hypothesis. In this case, type II error will be the conclusion that the average sales is not increased or compensation plan is not effective, when actually the sale is increased or compensastion plan is effective. This will result in no incentives to those sales person who have shown high performance or worked better than other.

(C) yes, this is a good idea as we know that by lowering the significance level, the chances of rejecting the true null hypothesis also get reduced. This means that we will have a more conservative result as compared to higher significance level.

orchestra answered 1 year ago
Next > < Previous

Related Solutions

ABC company's vice president of marketing proposes a new program to significantly increase product sales by...
ABC company's vice president of marketing proposes a new program to significantly increase product sales by 250,000 units per year throughout the 1998-2004 period. Specifically, it is suggested that the company take the following actions: A. Spend $2.5 million over the period of 1998-2000 as promotional expenditures - for example, spend $1.0 million each in the years 1998, 1999, and $0.5 million in the year 2000. B. Make a one-time investment of $1.4 million in plants and equipment needed at...
A case study of understanding communications Tom Ellery was vice president of sales and Steve Watson...
A case study of understanding communications Tom Ellery was vice president of sales and Steve Watson was a regional sales manager in charge of four district managers. Steve reported to one of three area managers who, in turn, reported to Tom. Tom had followed Steve's career with interest and considered him one of the best sales managers in the company. It was not surprising, then, that Steve's name came immediately to mind when Tom received a memo from the marketing...
A national computer retailer believes that the average sales are greater for salespersons with a college...
A national computer retailer believes that the average sales are greater for salespersons with a college degree. A random sample of 14 salespersons with a degree had an average weekly sale of $3542 last year, while 17 salespersons without a college degree averaged $3301 in weekly sales. The standard deviations were $468 and $642 respectively. Is there evidence to support the retailer’s belief? a. This is a: z-test for one proportion t-test for the mean t-test for matched pairs z-test...
Dittenhoefer’s Fine China introduction Overall, Steve Edwards, vice president of Marketing at Ditten-hoefer’s Fine China, is...
Dittenhoefer’s Fine China introduction Overall, Steve Edwards, vice president of Marketing at Ditten-hoefer’s Fine China, is very pleased with the success of his new line of Gem-Surface china plates. Gem-Surface plates are differ-ent from regular china in that the plates have a special polymer coating that makes them highly resistant to chipping and fad-ing. Not only are the plates more durable, they are also com-pletely dishwasher safe. In order to manufacture the new plates, Dittenhoefer’s has leased a special machine...
The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to...
The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to meet sales demand in the coming year. He is also trying to determine how the company’s profits might be increased in the coming year. This problem asks you to use cost-volume-profit concepts to help Waterways understand contribution margins of some of its products and decide whether to mass-produce any of them. Waterways markets a simple water control and timer that it mass-produces. Last year,...
The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to...
The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to meet sales demand in the coming year. He is also trying to determine how the company’s profits might be increased in the coming year. This problem asks you to use cost-volume-profit concepts to help Waterways understand contribution margins of some of its products and decide whether to mass-produce any of them. Waterways markets a simple water control and timer that it mass-produces. Last year,...
The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to...
The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to meet sales demand in the coming year. He is also trying to determine how the company’s profits might be increased in the coming year. This problem asks you to use cost-volume-profit concepts to help Waterways understand contribution margins of some of its products and decide whether to mass-produce any of them. Waterways markets a simple water control and timer that it mass-produces. Last year,...
The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to...
The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to meet sales demand in the coming year. He is also trying to determine how the company’s profits might be increased in the coming year. This problem asks you to use cost-volume-profit concepts to help Waterways understand contribution margins of some of its products and decide whether to mass-produce any of them. Waterways markets a simple water control and timer that it mass-produces. Last year,...
As vice president of sales for a rapidly growing company, you are grappling with the question...
As vice president of sales for a rapidly growing company, you are grappling with the question of expanding the size of your direct sales force (from its current level of 60 national salespeople). You are considering hiring from 5 to 10 additional personnel. sing hypotherical numbers, please explain (show work on excel): a)How would you estimate the additional dollar cost of each additional salesperson? b) Based on your company’s past sales experience, how would you estimate the expected net revenue...
As vice president of sales for a rapidly growing company, you are grappling with the question...
As vice president of sales for a rapidly growing company, you are grappling with the question of expanding the size of your direct sales force (from its current level of 60 national salespeople). You are considering hiring from five to 10 additional personnel. How would you estimate the additional dollar cost of each additional salesperson? Based on your company’s past sales experience, how would you estimate the expected net revenue generated by an additional salesperson? (Be specific about the information...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT