Accounting procedures allow a business to evaluate their inventory costs based on two methods: LIFO (last in first out)or FIFO (first in first out). A manufacturer evaluated its finished goods inventory (in $000s)for five products with the LIFO and FIFO methods. To analyze the difference,they computed FIFO − LIFO for each product. We would like to determine if the LIFO method results in a lower cost of inventory than the FIFO method. What is the null hypothesis? A)H₀: µ_d = 0 B)H₀: µ_d ≠ 0 C)H₀: µ_d ≤ 0 D)H₀: µ_d ≥ 0

Question

Quizplus · Accepted Answer

The null hypothesis should state that the mean difference of FIFO - LIFO is not less than or equal to zero, as we are trying to determine if LIFO results in a lower cost of inventory. Therefore, the correct choice is C: H₀: µ_d ≤ 0.

Accounting Procedures Allow a Business to Evaluate Their Inventory Costs