Use LIFO to minimize income taxes. Operating income under this method is lowest when inventory unit costs are increasing , as they are in this case. (If inventory unit costs were going the opposite direction, income under FIFO would be lowest.) b. report the highest operating income? Use FIFO to report the highest operating income. Income under this method is highest when inventory unit costs are increasing , as in this situation. c. report operating income between the extremes of FIFO and LIFO? Use the average-cost method to report an operating income amount between the FIFO and LIFO extremes. This is true in this situation and in others when inventory unit costs are increasing or decreasing . d. report inventory on the balance sheet at the most current cost? Use FIFO to report inventory on the balance sheet at the most current cost. The most current inventory costs are expensed as cost of goods sold, leaving in ending inventory the most current costs of the