Co-Products, By-Products & Scrap in TallyPrime: 3 Steps + Examples

TallyPrime allows you to create Bills of Materials (BoMs) that not only handle the main product but also account for co-products, by-products, and scrap generated during the manufacturing process.

Here’s a detailed explanation with examples:

1. Understanding Co-Products, By-Products, and Scrap:

1. Co-products:

These are commercially valuable products produced alongside the main product in a single manufacturing process.

They have similar economic significance to the main product.

Example: Processing milk yields cheese as the main product and whey as a co-product.

2. By-products:

These are products with a lower value compared to the main product.

They are generated incidentally during the manufacturing process but still have some commercial value.

Example: Sawdust generated during wood furniture production.

3. Scrap:

These are unusable materials leftover from the manufacturing process and have no commercial value.

Example: Metal shavings from machining operations.

2. Accounting for Co-Products and By-Products in BOMs:

1. Component Type Definition (F12):

In the “Create Stock Item” screen for the main product, enable the BOM functionality (as explained earlier in the single BOM section).

Then, press F12 (Configure) to access configuration options.

2. Set Component Types:

Look for the option related to “Component Type” and choose “Set.”

This opens a window for defining component types.

3. Define Co-Product and By-Product Types (if applicable):

In the “Component Type” window, you can create new types like “Co-Product” and “By-Product” (apart from the default “Raw Material”).

3. Example: BOM with Co-Product for Leather Tanning

You’re creating a BOM for processing raw hides into finished leather (main product).

During this process, usable trimmings are also generated, which can be sold as a co-product.

  1. Enable BOM and access “Component Type” definition (as explained above).
  2. Define two component types: “Raw Material” and “Co-Product.”

4. Creating the BOM:

  • In the BOM for the main product (“Finished Leather”), components will include:
    • Raw Material: Raw Hide (1 unit)
  • When defining co-products, you can create a separate stock item for “Leather Trimmings” and add it to the BOM with the “Co-Product” type:
    • Co-Product: Leather Trimmings (variable quantity based on raw hide processing)

5. Recording Production with Co-Products:

  • Use the Manufacturing Journal voucher to record production activity.
  • Select the BOM for “Finished Leather” during voucher creation.
  • While consuming the raw hide (1 unit), the system will automatically prompt you to enter the quantity of co-product (“Leather Trimmings”) generated during production.

6. Accounting for By-Products in TallyPrime (if applicable):

The process for by-products is similar to co-products.

However, you might need to estimate a more variable yield depending on the production process.

7. Accounting for Scrap in TallyPrime:

TallyPrime doesn’t directly account for scrap within BOMs.

However, you can manage scrap through the Stock Journal voucher:

  1. Create a Stock Journal voucher with the “Source” set to “Consumption” or similar (indicating outflow).
  2. Select the scrap item (e.g., “Leather Scraps”) from your stock items list.
  3. Enter the quantity of scrap generated during production.

8. Benefits of Accounting for Co-Products, By-Products, and Scrap:

1. Accurate Production Costing:

By including co-products and deducting scrap, you get a more accurate picture of the production cost per unit of the main product.

2. Improved Inventory Management:

Tracks the generation and flow of co-products and disposal of scrap, ensuring proper inventory control.

3. Enhanced Reporting:

Provides valuable data for reports, allowing you to analyze production efficiency and identify areas for waste reduction.

9. Additional Considerations:

  • You can define separate stock groups for co-products, by-products, and scrap to further categorize your inventory.
  • Regularly review and update BOMs to reflect any changes in co-product yields, by-product generation rates, scrap generation rates, or component usage.

By effectively utilizing BOMs with component types and managing scrap through Stock Journals, you gain a comprehensive understanding of your manufacturing processes, optimize production costs, and maintain efficient inventory management practices in TallyPrime.

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