Which inventory cost flow method assigns the newest costs to cost of goods sold?

• A. FIFO
• B. Weighted Average
• C. LIFO
• D. Specific Identification

Answer: (C)

This question is about how the cost-flow assumption determines which cost goes into cost of goods sold. The method in which the most recently incurred costs are matched to COGS means you’re selling the items that were bought most recently, so the cost of goods sold reflects the newest prices. That leaves the older, prior costs in ending inventory. This approach is known as LIFO.

If you were using the opposite approach (FIFO), you’d assign the oldest costs to COGS and keep the newest costs in ending inventory. A weighted-average method spreads a single average cost across all units, smoothing out price changes. Specific identification uses the exact cost of each specific unit sold, which works when items are distinct and can be tracked individually.

So the correct choice corresponds to the method where the newest costs are matched to COGS.