Final answer:
In a scenario where inventory costs are falling, the LIFO cost method would result in the highest gross profit since it uses the most recent, lower-cost items in the cost of goods sold.
Step-by-step explanation:
If inventory costs have been falling during the year, the cost method that results in the highest gross profit for the year would be the Last-In, First-Out (LIFO) method. During periods of declining prices, LIFO will result in the lowest amount of inventory cost being matched against revenues because the most recent, lower-cost items are used in the cost of goods sold.
Conversely, the First-In, First-Out (FIFO) method would report the highest cost of goods sold because the older, higher-cost inventory would be used up first, leading to a lower gross profit compared to LIFO. The weighted average cost method would result in a gross profit figure between LIFO and FIFO while the special identification method could vary greatly depending on which specific items were sold.