Under the LIFO inventory method, it is assumed that the cost of the latest units purchased are:

• A. the first to be assigned to cost of goods sold
• B. the last to remain in ending inventory
• C. averaged with earlier costs for cost of goods sold
• D. never included in cost of goods sold

Answer: (A)

Verified step by step guidance

1. Understand the concept of LIFO (Last-In, First-Out) inventory method: Under LIFO, the most recent inventory purchases are assumed to be sold first, meaning the cost of the latest units purchased is assigned to the cost of goods sold.
2. Analyze the implications of LIFO: Since the latest inventory costs are assigned to cost of goods sold, the older inventory costs remain in ending inventory. This method is often used during periods of rising prices to match higher costs with current revenues.
3. Compare LIFO with other inventory methods: Unlike FIFO (First-In, First-Out), where the oldest inventory costs are assigned to cost of goods sold, LIFO focuses on the most recent costs. It also differs from the weighted average method, which averages all inventory costs for cost of goods sold and ending inventory.
4. Evaluate the options provided in the problem: The correct answer aligns with the principle of LIFO, which states that the latest units purchased are the first to be assigned to cost of goods sold, and the last to remain in ending inventory.
5. Conclude the reasoning: Based on the explanation of LIFO, eliminate incorrect options such as averaging costs or excluding costs from cost of goods sold, and confirm the correct answer as the first to be assigned to cost of goods sold.