The LIFO inventory costing method assumes that the cost of the units most recently purchased is:
A) the last to be assigned to cost of goods sold.
B) the first to be assigned to ending inventory.
C) the first to be assigned to cost of goods sold.
D) not assigned to cost of goods sold or ending inventory.

Question

Quizplus · Accepted Answer

The LIFO (last in, first out) inventory costing method assumes that the cost of the units most recently purchased is the first to be assigned to cost of goods sold. This is because the assumption is that the most recently purchased items are the ones that are sold first, and therefore their cost should be assigned to cost of goods sold. The older items that are still on hand would then be assigned to ending inventory.

The LIFO Inventory Costing Method Assumes That the Cost of the Units