Question

Product FIFO LIFO

1 ; 225 ; 221


2 ; 119 ; 100


3 ; 100 ; 113


4 ; 212 ; 200


5 ; 248 ; 245 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.If you use the 5% level of significance, what is the critical t value?

Answer 1

The null hypo would be the difference is greater than 0

so the alternate hypothesis would be less than or equal to 0

H1: µd ≤ 0