We are running into the “price amplification” effect with Moving Average costing in Dynamics 365 F&O. This is a well-known limitation whenever:

• Negative financial inventory is allowed,
• On-hand quantity reaches zero (or below), and
• The system tries to post an issue transaction without a proper moving average base → resulting in inflated or distorted costs.

Microsoft’s reply ("by design") basically means they aren’t considering it a bug, but a structural limitation of moving average valuation.

We need some functionality to overcome this design limitation