Accounting Procedures Allow a Business to Evaluate Their Inventory Costs

question 54

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. Based on the following results, does the LIFO method result in a lower cost of inventory than the FIFO method? If you use the 5% level of significance, what is the critical t value?

• A)+2.132
• B)±2.132
• C)+2.262
• D)±2.228

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Definitions:

Employer

An individual or organization that hires and pays people to work.

Wages Expense

The total cost incurred by an organization to pay salaries and wages to its employees for a specific period.

Accrued Liability

A liability that has been incurred, is recognized on the balance sheet, and has not yet been paid.

Deferred Revenues

Deferred revenues are payments received by a company for goods or services that have not yet been delivered or performed, recognized as liabilities on the balance sheet.