Co product and By Product

[Former Member]

Hi PP Gurus,

Can anyone tell me the exact difference between coproduct and by product.

Is there any indicator in Material Master that wil indicate that this material ia a co product or a by product

Thanks in advance

Abhijeet

[former_member196398 · Accepted solution]

Abhijeet,

Yes you are right if a materail is coproduct, you need to activate the coproduct check box in material master MRP2 view. Also in the BOM you need to define this material in -ve quantity. For coproducts we also need to define the apportionate structure with equivalence number for costing purpose, this will be done in "Joint Production" details in the same view.

Biproduct has only the -ve quantity in BOM component, it does not go for joint production costing.

Hope this helps....Reward your points,

Regards,

Prasobh

[Former Member · Accepted solution]

hi Prasobh

Thanks for the reply.

Can you please explain me with an example the joint production costing difference.

It will help me in understanding the difference more precisely

Thanks

Abhi

[former_member184627 · Accepted solution]

Hi,

As told by Prasob you have to give -ve for by product.

Also for by-product <b>do not check</b> the co-product indicator in the material master.

Regards,

Senthilkumar SD

[former_member196398 · Accepted solution]

Abhijeet,

Let me try with a Oil Industry scenario.

If you look at a petro chemical refining industry their main input material will be "Crude oil" during refining they get "Petrol", "Diesel", "Kerosene", "Naptha" & "Water" etc...

So the whole of the production cost should not go to "Petrol" alone, as Diesel, Kerosene and "Naptha" are also sellable. Water is not sold out, but is being used internal for the operation.

In this scenario "Petrol"."Diesel", "Kerosene" and "Naptha" are defined as coproducts in the material master. And the cost which needs to be disrtibuted among them are in the ratio 30:30:20:20, so in the joint production details we select the apportionment structure, and here we define the equivalence number by entering the materials and numbers as required by us as 30:30:20:20.

Now BOM is defined for the main product "Petrol" and Diesel", "Kerosene", "Naptha" and Water are defined in -ve quantity. Here the defination of water goes as "BiProduct". Crude oil is defined as component in +ve quantity. Now during order costing/product costing/settlement considers the entire cost of production based on the crude oil cost and infrastructure cost and it splits into the ratio defined in the equivalence number.

Hope this helps...Reward your points and close the thread if so,

Regards,

Prasobh

[Former Member · Accepted solution]

Thanks Prasobh,

Excellent explaination...

Just one thing to clear.

with reference to your example itself.

We will have two BOMs (Petrol and Deisel) ?

And both these products will also be coproducts ?

Thanks and Regards

Abhi

[former_member196398 · Accepted solution]

Abhijeet,

If Petrol & Diesel is produced from different process then yes, if not a single BOM. As described by me except "Crude Oil" and "Water" remaining all materails needs to be defined as Coproducts.

Hope this clarifiys, Reward your points and close the thread.

Regards,

Prasobh

[Former Member]

Hi Abhijeet,

The below thread was posted earlier and below is the one of good explainiantion to understand the functionality between co-product and by-product.

By product is the product which will be creaed while making production

you have to maintain the setting in BOM with negative quantity (-). Then system automatically will pick this as by prodcut.

movement type 531 to post the by-product during confirmation. Settlement of cost will be done to the header of material.

Co product is the product

You have to activate check box in MRP2 view for co product.

Co-Products

Use

Products that are usually manufactured together can be produced using one production order.

The main product is the primary reason for the production process. It is displayed in the production order header. The system also creates a separate order item for the main product.

A co-product is a product that is produced in conjunction with other products. The system creates a separate order item in the production order for each co-product. As a result, it is possible to display actual costs at co-product level.

A by-product is a product that is produced in conjunction with other products. The system does not create a separate order item for each by-product. The material valuation of a by-product is always based on the price specified by price control in the material master.

Creating a production order to manufacture co-products has the following advantages:

Main product and co-product(s) are settled to different receivers

Goods movements can be posted simultaneously for all products manufactured in the order

The following prerequisites must be fulfilled if you want to create a production order with co-products or by-products.

Prerequisite for the main product:

The indicator Co-product must be activated in the material master of the main product (MRP area)

Prerequisites for a co-product:

The indicator Co-product must be activated in the material master of the co-product (MRP area)

The co-product must be listed as an item in the bill of material of the main product

On the Basic data tab page of the BOM item, the indicator Co-product must be activated in the field group General data.

Prerequisites for a by-product:

The by-product must be listed as an item in the bill of material of the main product

The bill of material item must have a negative quantity (for example ‘1 -’).

Regards

TAJUDDIN