MFG/PRO 9.0 User Guide Volume 3: Manufacturing - QAD.com

Although prune juice is a significant co-product of Base Process A, it is
also a co-product of Base Process B and, as defined in the BOM/Formula
field of Item Master Maintenance (1.4.1), takes its costs from Base
Process B. For Base Process A, cost allocation percentages are:
Co-product 1 (Pitted Prunes) 80%
Co-product 2 (Prune Juice) 0%
Co-product 3 (Prune Purée) 20%
Final allocated costs are:
Co-product 1 (Pitted Prunes) $100 x 80% = $80
Co-product 2 (Prune Juice) $100 x 0% = $0
Co-product 3 (Prune Purée) $100 x 20% = $20
By-product costs are calculated the same way as regular costs. That is,
they are determined separately from the base process cost roll-up.
Once by-product costs are established, freeze them to ensure they are not
changed during cost roll-up. Changing by-product costs after net base
process costs have been calculated may result in unanticipated variances.
As in the previous example, the net cost for the base process should equal
the sum of the costs allocated to the co-products. If these amounts are not
equal, one or more of the following is likely.
• By-product costs were not frozen once subtracted from the base
process gross cost. The system recalculated the by-product costs,
changing the value of the base process net cost.
• Cost allocation percentages did not add up to 100%.
• Costs were allocated to a co-product whose cost was determined from
a different base process than the one being rolled up. This can happen
when a co-product is in the product structure of more than one base
process.
If co-product costs do not add up to the base process net cost when work
orders are closed, method change variances result.
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