Accounting procedures allow a business to evaluate its 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. Based on the following results, does the LIFO method result in a lower cost of inventory than the FIFO method? What is the decision at the 5% level of significance?
A) Fail to reject the null hypothesis and conclude LIFO is more effective.
B) Reject the null hypothesis and conclude LIFO is more effective.
C) Reject the alternate hypothesis and conclude LIFO is more effective.
D) Fail to reject the null hypothesis.

Question

Accounting procedures allow a business to evaluate its 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. Based on the following results, does the LIFO method result in a lower cost of inventory than the FIFO method?  What is the decision at the 5% level of significance?
A) Fail to reject the null hypothesis and conclude LIFO is more effective. 
B) Reject the null hypothesis and conclude LIFO is more effective. 
C) Reject the alternate hypothesis and conclude LIFO is more effective. 
D) Fail to reject the null hypothesis.

Quizplus · Accepted Answer

The Answer of Accounting procedures allow a business to evaluate its 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. Based on the following results, does the LIFO method result in a lower cost of inventory than the FIFO method?  What is the decision at the 5% level of significance?
A) Fail to reject the null hypothesis and conclude LIFO is more effective. 
B) Reject the null hypothesis and conclude LIFO is more effective. 
C) Reject the alternate hypothesis and conclude LIFO is more effective. 
D) Fail to reject the null hypothesis.

Accounting Procedures Allow a Business to Evaluate Its Inventory Costs