Accounting Procedures Allow a Business to Evaluate Their Inventory at LIFO

question 45

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 $000) 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) Looking at the large P-value of .2019 we 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. DThe large P-value of .2017 indicates that there is a good chance of getting this sample data when the
• D) two methods are in fact not significantly different, so we conclude that LIFO is not more effective.
• E) None of these statements are correct.

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Definitions:

Sample Size

The number of observations or elements selected from a population for the purpose of statistical analysis.

Confidence Interval

A Confidence Interval is a range of values derived from sample statistics that is likely to contain the true population parameter at a given confidence level.

Population Mean

The average value of a set of characteristics (e.g., measurements, scores) for an entire population, calculated as the sum of all values divided by the number of values.

Confidence Interval

A statistical estimate of the range within which an unknown population parameter lies, calculated to express the certainty of its covering the true value.