Accounting Procedures Allow a Business to Evaluate Their Inventory at LIFO

question 30

Multiple Choice

Accounting procedures allow a business to evaluate their inventory at LIFO (Last In First Out) or FIFO (First In First Out) .A manufacturer evaluated its finished goods inventory (in $ thousands) for five products both ways.Based on the following results,is LIFO more effective in keeping the value of his inventory lower? 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 and conclude LIFO is not more effective.

---

Definitions:

Hurdle Rate

The lowest acceptable profit that a project or investment must generate to meet the requirements of a manager or investor.

Projected Cash Flows

Estimates of the amount of money expected to flow in and out of a business over a future period.

Time Value of Money

The principle that a dollar received today is worth more than a dollar received in the future, due to its potential earning capacity.