How is a by-product of a Production process handled in the Production Order?

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In the production order process, by-products are controlled by having a child item with a negative quantity. All by-products (child items with a negative quantity) will have an 'Issue Method' of 'Back Flush' by default.

  
When the 'Production Order' (PO) is closed the by-product's quantity in stock is increased by the number which appears in the 'Planned Quantity' of the PO.
   

In the closed PO:
The 'Actual Component Cost' does not include the cost of the by-product. In the example in the screenshot the GBP32 is a sum of (2*15 + 2*1) and does not include the 3*10 of the by-product.The 'Actual Product Cost' is a sum of the 'Actual Component Cost' and the 'Actual Additional Cost'. In the screenshot it is 32 +20. The 20 is the non stock item cost.


The journal entry that is created when the PO is closed will record the difference caused by the by-product and this enters the 'Work In Progress Variance Account'. The GBP amount in the screenshot is the sum of 20 (from  non stock item) plus 30 (from the by-product).