Accounting procedures allow a business to evaluate its 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? 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

Question

Accounting procedures allow a business to evaluate its 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?  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

Quizplus · Accepted Answer

The given example involves comparing the inventory costs of the same products using two different methods (LIFO and FIFO) and computing the difference between the two methods for each product. This is an example of a paired t-test, which compares the means of two related samples. Therefore, option C is the correct choice. Option A (one-sample test of means) and option D (test of proportions) are not applicable here since we are not comparing the sample mean to a known population mean or proportions of two populations. Option B (two-sample test of means) is not applicable either as we are not comparing the means of two independent samples.

Accounting Procedures Allow a Business to Evaluate Its Inventory Costs