Galliart Company has two identical divisions, East and West. Their sales, production volume, and fixed manufacturing costs have been the same for the last five years. The amounts for each division were as follows:
East Division uses absorption costing and West Division uses variable costing.
Both use FIFO inventory methods.
Variable manufacturing costs are $5 per unit.
Selling and administrative expenses were identical for each division.
There were no inventories at the beginning of 2014.
Which division reports the highest income each year? Explain.
Definitions:
Chi-square Statistic
A measure used in statistics that quantifies how much observed counts diverge from expected counts.
Null Hypothesis
A default hypothesis that there is no effect or no difference, and it is tested against an alternative hypothesis.
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