Final answer:
The LIFO inventory costing method assumes that the cost of the most recently purchased units is the first to be assigned to cost of goods sold.
Step-by-step explanation:
The LIFO (Last-In, First-Out) inventory costing method is used to manage inventory and cost of goods sold (COGS) on financial statements. Under the LIFO assumption, when a company sells a product, the cost associated with manufacturing or purchasing that product is based on the prices of the most recent units added to inventory. Hence, the cost of the units most recently purchased is the first to be assigned to cost of goods sold.
This means that when it's time to calculate COGS for the period, the costs of the most recent purchases are used first. In periods of rising prices, this would typically result in higher costs of goods sold and lower reported profits or net income, as the newer inventory, which is assumed more expensive due to inflation, is being sold. Conversely, the older, less expensive inventory remains on the balance sheet as part of the ending inventory.
To answer the multiple-choice question given by the student, the correct selection is: C. the first to be assigned to cost of goods sold.