Question

Statistical analysis allows a manufacturer to evaluate its inventory costs based on two methods: LIFO (Last In First Out) or FIFO (First In First Out). The manufacturer evaluated its finished goods inventory costs in $000 for five products with the FIFO and LIFO methods. Based on the following results, does the FIFO method result in a higher cost of inventory than the LIFO method? To analyze the inventory costs, compute the difference by the FIFO cost minus LIFO cost for each product. For example, the difference for Product 1 is 4 (225 - 221). Suppose that the population of paired differences is normally distributed.

Product FIFO LIFO
1 225 221
2 119 100

3 100 113

4 212 200

5 248 245
What is the conclusion for the hypothesis test?

Select one:

A. Fail to reject H_0. This implies that the data support the claim that the FIFO method costs more than the LIFO method.

B. Reject H_0. This implies that the data do not support the claim that the FIFO method costs more than the LIFO method.

C. Reject H_0. This implies that the data support the claim that the FIFO method costs more than the LIFO method.

D. Fail to reject H_0. This implies that the data do not support the claim that the FIFO method costs more than the LIFO method.

Answer 1