Dynamics 365 SCM Damaged Inventory Management
A company uses Dynamics 365 Supply Chain Management and the FIFO valuation method for inventory. The company’s warehouse experienced a roof leak. The leak caused damage to items in the warehouse. Accounting must know the total cost of inventory that is damaged but does not want the damaged items removed from inventory until they have been inspected. You need to meet the requirements of the accounting department. Which two features should you use? Each correct answer presents part of the solution. NOTE: Each correct selection is worth one point.
Community Votes
100% of anonymous learners picked answer BE. Votes are pick records left by other test-takers — they are not the verified answer.
Community Insight
The question tests the ability to isolate damaged goods for accounting reporting without removing them from inventory, a common trap involving physical vs. logical inventory changes.
Learn how to manage damaged inventory in Dynamics 365 Supply Chain Management using inventory status and movement journals. This guide explains how to report costs while keeping items physically in stock.
Users often select 'Stop item' or 'Order holds', which prevent transactions but do not facilitate the specific accounting reporting of damaged cost values required here.
Community Discussion (3 comments)
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Expert Analysis
Why the Answer Is Correct
To meet the requirement of knowing the total cost of damaged inventory while keeping items on hand, you must use Inventory status (E) and Movement journal (B). Inventory status allows you to define a category (e.g., "Damaged") that separates these items logically from good stock, enabling specific costing and reporting. The Movement journal is then used to transfer the quantity to this new status, effectively recording the condition change without removing the items from the warehouse system.Why the Other Options Are Wrong
Stop item for inventory transactions (A) prevents all activity on an item, which is too restrictive and doesn't help categorize damage. Order holds (C) affect sales orders, not inventory valuation or status. Location profile (D) controls warehouse location logic but does not inherently handle damage categorization or cost reporting for damaged goods.Community Comment Notes
Community consensus strongly supports BE. As one user noted, "Inventory status is the core feature for isolating damaged items... Movement journal complements it by providing the mechanism to apply the 'Damaged' status." Another comment linked directly to Microsoft documentation confirming inventory statuses are used for such categorizations.Official Reference
Exam Strategy
Always distinguish between physical removal and logical reclassification. If the items stay in the warehouse but need different accounting treatment, look for options that change status or classification rather than quantity or availability.
Frequently Asked Questions
Why not use Stop Item for damaged goods?
Stop Item blocks all transactions, preventing any tracking or reporting of the specific damaged cost. It is too broad for this scenario.
Can I just adjust the cost manually?
No, Dynamics 365 requires proper inventory activities like movement journals to update inventory status and ensure accurate costing and traceability.