MB-920 Describe Dynamics 365 Finance Practice Question
You are the Dynamics 365 Finance consultant for Contoso Ltd., a manufacturing company that uses standard cost inventory valuation. The company recently implemented a new production line for a high-volume product. The production manager reports that the actual manufacturing costs significantly exceed the standard costs set for the product. You need to analyze the variance and adjust the standard costs for future periods. The company requires that any adjustment to standard costs be effective from the start of the next fiscal year, which begins in three months. Additionally, the inventory on hand must be revalued at the new standard cost. What should you do?
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
✓
Create a costing version with the new standard costs and set the effective date to the start of the next fiscal year. Then run a cost revaluation journal to revalue inventory at the new cost.
Standard cost changes must be done through a costing version with a future effective date. The requirement is to have the new standard cost effective from the start of the next fiscal year, so creating a costing version with that effective date ensures the cost is updated only from that date. Additionally, running a cost revaluation journal revalues the on-hand inventory to the new standard cost, which satisfies the inventory revaluation requirement. Option A is incorrect because an inventory adjustment journal revalues inventory but does not change the standard cost in the item master for future periods; it would also apply immediately. Option B is incorrect because updating the costing version with immediate effect would make the new cost effective now, not at the start of the next fiscal year. Option C is incorrect because posting variances to an account does not change the standard cost for future periods; it only records the variance.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Use an inventory adjustment journal to revalue the on-hand inventory to the new standard cost and change the item's standard cost in the item master.
Why it's wrong here
Incorrect: Inventory adjustment journals do not change standard costs; they adjust inventory value.
- ✗
Create a standard cost revaluation journal for the current period and update the standard cost in the costing version with immediate effect.
Why it's wrong here
Incorrect: This changes the cost now, not from the next fiscal year.
- ✗
Post the manufacturing variances to a variance account and close the variances to cost of goods sold at year-end.
Why it's wrong here
Incorrect: This does not adjust the standard cost.
- ✓
Create a costing version with the new standard costs and set the effective date to the start of the next fiscal year. Then run a cost revaluation journal to revalue inventory at the new cost.
Why this is correct
Correct: This schedules the change for the next fiscal year and revalues inventory.
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