This MB-920 practice question tests your understanding of describe dynamics 365 supply chain management. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A company needs to calculate the cost of manufactured products including direct materials, labor, and overhead. Which costing methodology in Dynamics 365 Supply Chain Management should they use?
Weighted average
Why wrong: Weighted average is an inventory valuation method, not a costing methodology.
Standard costing
Standard costing uses predetermined costs for materials, labor, and overhead to calculate product costs.
FIFO
Why wrong: FIFO is an inventory valuation method, not a costing methodology for manufacturing.
Moving average
Why wrong: Moving average is a costing method for inventory, not for manufacturing.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Standard costing
Standard costing is the correct methodology because it allows the company to define predetermined costs for direct materials, labor, and overhead, and then calculate variances against actual costs. In Dynamics 365 Supply Chain Management, standard costing is specifically designed for manufacturing scenarios where you need to value inventory and cost of goods sold based on expected costs, with variance tracking for deviations.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
Weighted average
Why it's wrong here
Weighted average is an inventory valuation method, not a costing methodology.
Standard costing
Why this is correct
Standard costing uses predetermined costs for materials, labor, and overhead to calculate product costs.
Related concept
Read the scenario before looking for a memorised answer.
FIFO
Why it's wrong here
FIFO is an inventory valuation method, not a costing methodology for manufacturing.
Moving average
Why it's wrong here
Moving average is a costing method for inventory, not for manufacturing.
Common exam traps
The trap here is that candidates confuse inventory valuation methods (FIFO, weighted average, moving average) with manufacturing costing methodologies, but standard costing is the only option that explicitly handles the calculation of manufactured product costs including direct materials, labor, and overhead.
Detailed technical explanation
In Dynamics 365 Supply Chain Management, standard costing uses a BOM (Bill of Materials) and route to calculate a standard cost for each manufactured item, which is then used for inventory valuation and cost of goods sold. Variances such as purchase price variance, production variance, and quantity variance are automatically calculated and posted to specific ledger accounts, enabling detailed cost control and analysis. A real-world scenario is a manufacturer that sets standard costs annually and uses variance reports to identify inefficiencies in procurement or production.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
A startup's cloud architect reviews their monthly bill and notices costs are higher than expected for a long-running batch job. Switching from on-demand instances to Reserved Instances — or using Spot/Preemptible VMs — can reduce compute costs by up to 72 %. Questions like this test whether you understand the tradeoffs between commitment, flexibility, and cost across cloud pricing models.
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FAQ
Describe Dynamics 365 Supply Chain Management — This question tests Describe Dynamics 365 Supply Chain Management — Read the scenario before looking for a memorised answer..
The correct answer is: Standard costing — Standard costing is the correct methodology because it allows the company to define predetermined costs for direct materials, labor, and overhead, and then calculate variances against actual costs. In Dynamics 365 Supply Chain Management, standard costing is specifically designed for manufacturing scenarios where you need to value inventory and cost of goods sold based on expected costs, with variance tracking for deviations.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Read the scenario before looking for a memorised answer.
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Last reviewed: Jun 24, 2026
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