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For product A, the sale order is for 500 units.

There are already 200 units of Product A available. 

The manufacturing order is automatically created whenever the sale order is confirmed. Manufacturing order only create 500 QTY.system does not consider the available quantity (200 units). 

Why?

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Because you are using the wrong rules if you want to check for stock. Please check:

https://www.odoo.com/forum/help-1/when-to-use-make-to-order-mto-reordering-rules-rr-master-production-schedule-mps-190246

Keep in mind that if you use MTO odoo checks stock first, and if stock doesn't meet the needs it will trigger a MO or PO for the full quantity, as it is Make To Order.

Hope that clarifies something.

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If you are using MTO and want to check stock ensure that the supply method on the rule is 'Take from stock, if unavailable trigger another rule'

You can also use replenishment rules (min, max and multiples of) if you wish to check stock and then trigger replenishment of the product

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