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 $1000) 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.
D) The large P-value of.2017 indicates that there is a good chance of getting this sample data when the two methods are in fact not significantly different, so we conclude that LIFO is not more effective.

Question

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 $1000) 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. 
D) The large P-value of.2017 indicates that there is a good chance of getting this sample data when the two methods are in fact not significantly different, so we conclude that LIFO is not more effective.

Quizplus · Accepted Answer

The large P-value of.2017 indicates that there is a good chance of getting this sample data when the two methods are, in fact, not significantly different, so we conclude that LIFO is not more effective. So, we cannot reject the null hypothesis that both methods are equally effective, and we choose D as our answer.

Accounting Procedures Allow a Business to Evaluate Their Inventory at LIFO