Accounting Procedures Allow a Business to Evaluate Their Inventory Costs

question 16

Multiple Choice

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

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Definitions:

ROI

An evaluation tool applied to determine the profitability or efficiency of a single investment or to analyze and compare the efficacy of multiple investments.

Margin

The difference between the selling price of a product and its cost, often expressed as a percentage of the selling price.

Division

A distinct part of a larger company or organization that operates semi-independently, focusing on a specific set of products, services, or market segment.

Investment Opportunity

A potential venture or asset that presents the possibility for financial growth or returns.