What does the Last In, First Out (LIFO) method assume about inventory usage?

The Last In, First Out (LIFO) method is based on the assumption that the most recently acquired inventory items are the first to be used or sold. This approach is often used in environments where inventory costs are rising because it aligns the most recent costs associated with inventory purchases with current revenues from sales. As a result, under LIFO, the ending inventory will consist of the older, less expensive stock, while the costs of goods sold reflect the higher acquisition costs of the newer inventory. This can affect financial metrics and tax calculations, especially in inflationary scenarios.

The other options do not accurately represent the LIFO methodology, as they either describe opposite inventory practices or a different approach altogether.