Accounting Procedures Allow a Business to Evaluate Their Inventory Costs

Multiple Choice

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. Based on the following results, does the LIFO method result in a lower cost of inventory than the FIFO method? What is the null hypothesis?

A) H₀: µ_d = 0
B) H₀: µ_d ≠ 0
C) H₀: µ_d ≤ 0
D) H₀: µ_d ≥ 0