Inventory Management is most popular terms in ERP segment….
Cost Price(Activated Cost Price)
Cost price is entered in the products created
Running AVG cost price (if cost price is not set)
Estimated price = (physical amount + financial amount) / (physical quantity + financial quantity)
If the physical on-hand inventory goes negative, Microsoft Dynamics AX uses the inventory cost that is defined for the item in the Item form
Item Model Groups and costing methods
These are created to defined various parameters and
To attach which valuation methods are going to use, these are
Weighted Average
Weighted Average Date
LIFO
LIFO Date
FIFO
Fixed Receipt Price (Old Standard Costing)
(New) Standard Cost
Moving Average
Item Groups
Item groups are used to manage inventory by dividing inventory items into groups.
Set up a posting profile for a group of items that require a posting setup other than the standard posting profile that is set up for items in the Posting form
lists a series of account types that must be related to main accounts in the general ledger. Accounts for sales, purchases, inventory, and production can be set up in detail, according to your legal entity’s need.

Different inventory transactions: inventory valuation get impact from various transactions
Summary of Inventory Costing Process
Receipt ,Issue
Inventory Postings
Inventory Closing
Inventory Costing Process
Receipt
Physical Receipt : Transactions that increase quantity are posted at the running average cost price (Estimated). Microsoft Dynamics AX calculates a running average cost price that is based on the cost of each of these transactions for each inventory dimension that is being tracked financially.
Financial Receipt : Receipt costs set by user
Issue
Physical Issue: AX uses the calculated running average cost price when a transaction that decreases quantity is posted, regardless of which inventory model is associates with that inventory. This requires that the transaction that decreases quantity was not previously marked to another transaction before posting.
Financial issue: (issue costs set by AX, based on related receipts)
If the physical on-hand inventory goes negative, Microsoft Dynamics AX uses the inventory cost that is defined for the item in the Item form
Inventory Closing: The inventory close process in Microsoft Dynamics AX settles issue transactions to receipt transactions based on the inventory valuation method that is selected in the item’s item model group.
Inventory Postings
Receipt (receipt costs set by user)
Physical Receipt: Interim Inventory to Accrued Purchases
Financial Receipt: Inventory to AP
Accrued Purchases to Interim Inventory
Issue (issue costs set by AX, based on related receipts)
Physical Issue: COGS to Inventory
Financial issue: AR to Sales
Inventory Closing :
Physical Issue: Adjustments
Financial issue: Adjustments
Inventory Closing Procedure
The Microsoft Dynamics AX inventory close process settles issue transactions to receipt transactions based on the inventory valuation method that is selected in the item’s item model group. You can also choose to have the general ledger updated to reflect the adjustments that have been made.
However, until inventory close or recalculation is run, Microsoft Dynamics AX posts issue transactions at the calculated running average cost price.

Sunbridge is Microsoft Dynamics 365 partner in Pune, India