MB-920 Describe Dynamics 365 Finance Practice Question
A manufacturing company uses Dynamics 365 Finance. They want to ensure that raw materials are automatically reserved when a production order is created and that the cost of the raw materials is included in the production order cost. Which costing method supports this requirement?
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
✓
Standard costing
Standard costing uses predefined standard costs, allowing automatic reservation of materials at standard cost and inclusion of those costs in the production order. Option A (Weighted average) calculates cost based on average inventory cost, not standard cost, and does not support automatic reservation. Option C (LIFO) and D (FIFO) are inventory valuation methods based on physical flow and actual costs, not standard costs, and do not enable automatic reservation at standard cost.
Answer analysis
Option-by-option breakdown
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 calculates costs based on average, not standard cost.
- ✓
Standard costing
Why this is correct
Standard costing uses predetermined costs, allowing automatic reservation of materials and inclusion in production order cost.
- ✗
LIFO
Why it's wrong here
LIFO is not commonly used in Dynamics 365 Finance and does not support standard costing.
- ✗
FIFO
Why it's wrong here
FIFO is a valuation method based on physical flow, not designed for automatic reservation of materials at standard cost.
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