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. Product FIFO (F) LIFO (L) 1 225 221 2 119 100 3 100 113 4 212 200 5 248 245 a) What are the degrees of freedom? A) 4 B) 5 C) 15 D) 10 b) 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 c) What is the value of calculated t? A) +0.933 B) ±2.776 C) +0.47 D) −2.028
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.
|
Product |
FIFO (F) |
LIFO (L) |
|
1 |
225 |
221 |
|
2 |
119 |
100 |
|
3 |
100 |
113 |
|
4 |
212 |
200 |
|
5 |
248 |
245 |
a) What are the degrees of freedom?
A) 4
B) 5
C) 15
D) 10
b) 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
c) What is the value of calculated t?
A) +0.933
B) ±2.776
C) +0.47
D) −2.028
d) 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.
e) This example is what type of test?
A) A one-sample test of means
B) A two-sample test of means
C) A paired t-test
D) A test of proportions
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