Residual materials (by-products) can occur in a production process as a direct result of the manufacture of co-products. The net realizable-value method is used to calculate the costs for the by-products, whereby the cost of goods manufactured for the primary product is produced by deducting the values for the by-products from the total costs of the production process. The costs of the by-product thus represent a reduction in the costs of the primary product or process.

The Co-product indicator is not set on the BOM item under which the by-product is entered; instead, a negative quantity is entered.

In the material list or BOM for the primary product or process, you enter the by-product with a negative quantity. If the by-product is indicated as "relevant to costing", the total costs for the process are reduced by the amount of the costs of the by-product.

You can calculate the cost of goods manufactured for a by-product in two ways:

• A price from the material master is used. The cost of goods manufactured for the by-products are arrived at by multiplying the output quantity by the price, and they appear in the itemization of the cost estimate with a negative value.

• The by-product can be manufactured using an alternative production structure, and there is already a corresponding cost estimate for the by-product. In this case, this cost component split of the by-product is subtracted, cost component by cost component. The cost of goods manufactured for the by-products is arrived at by multiplying the output quantity by the costing results of the by-product from the alternative cost estimate.