MB-920 Describe Dynamics 365 Supply Chain Management Practice Question
A distribution company uses Dynamics 365 Supply Chain Management. They notice that the cost of goods sold (COGS) is being incorrectly calculated for certain items. The items are set up with a costing method of 'FIFO' and the inventory model is 'FIFO with physical value'. The issue occurs when purchase orders are received but not yet invoiced. What is the most likely cause of the incorrect COGS calculation?
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
The physical receipt cost differs from the final invoice cost
In a FIFO costing method with 'FIFO with physical value' model, COGS is calculated based on the physical receipt cost until the invoice is posted. If the physical receipt cost differs from the final invoice cost, the COGS will be temporarily incorrect until the invoice is updated. Option A is incorrect because running inventory close would correct costs after invoicing, but the issue here is a timing difference before invoicing. Option B is incorrect because standard cost is a different costing method not related to the FIFO setup. Option D is incorrect because 'FIFO with financial value' would change when costs are updated, but the current model 'FIFO with physical value' is appropriate for the described behavior.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
The inventory close process has not been run
Why it's wrong here
Inventory close corrects costs after the period, but the question describes a persistent error before close.
- ✗
The costing method should be 'Standard cost'
Why it's wrong here
The issue is not related to the costing method but to the timing of cost updates.
- ✓
The physical receipt cost differs from the final invoice cost
Why this is correct
In FIFO with physical value, COGS is based on physical receipt cost until invoiced, which can cause incorrect COGS if the receipt cost is inaccurate.
- ✗
The inventory model should be 'FIFO with financial value'
Why it's wrong here
The model is correctly set; the issue is related to physical receipt cost.
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