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 $ thousands) for five products both ways. Based on the following results, is LIFO more effective in keeping the value of his inventory lower?
1. What is the null hypothesis?
A) μF = μL
B) μF ≠μL
C) μF ≤ μL
D) μF > μL
2. What is the alternate hypothesis?
A) μF = μL
B) μF ≠μL
C) μF ≤ μL
D) μF > μL
3. What is the degree of freedom?
A) 4
B) 5
C) 15
D) 10
E) 9
4. If you use the 5% level of significance, what is the critical t value?
A) +2.132
B) ± 2.776
C) +2.262
D) ± 2.228
5. What is the value of calculated t?
A) +0.93
B) ± 2.776
C) +0.47
D) - 2.028
6. 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 and conclude LIFO is not more effective.
7. This example is what type of test?
A) One sample test of means.
B) Two sample test of means.
C) Paired t-test.