By-Products from Work Orders

The By-Products feature allows manufacturing users to produce multiple products, including by-products, within a single work order. This improves inventory tracking by recording all produced items in one work order. By-product costs can be calculated using either the Fixed Cost Method or the Allocation Method.

Example Workflow: Peeled Apple Snack Box and By-Products

• Finished Good: Peeled Apple Snack Box

  • Formula/BOM:

    • 1 Apple

    • 1 Box

    • 1 Plastic Wrap

• By-Products: Sold to an Apple Cider Vinegar Company

  • 1/4 Ounce Apple Peels

  • 1 Apple Core

Setting Up By-Products for Finished Goods

1. Create Items for the Finished Good and By-Products:

   • Follow this guide to create finished goods with a formula (BOM).

2. Define By-Products for a Finished Good:

   • Open the Item for the finished good.

   • Navigate to the By-Products (Parent Item) related list.

   • Click New.

• In the Item field, enter the by-product.

• In the Qty Per field, enter how much of the by-product is created when producing one unit of the finished good.

• Enter the Unit of Measure (UOM) for the by-product.

• Click Save (or Save & New if adding another by-product).

• Enable Lot Tracking for By-Products:

  • In the By-Products (Parent Item) list, click the pencil icon next to Lot Tracked.

  • Check Lot Tracked and click Save.

• Note
  that the by-product(s) are added to the related list for the finished goods.

Assigning Fixed Costs to By-Products (Optional)

Assign Fixed Costs

• Open the Item Details Page for the finished good associated with the by-product.

• Navigate to the By-Products (Parent Item) related list.

• Click the By-Product record.

• Click the pencil icon next to Fixed Unit Cost.

• Enter the fixed cost and click Save.

Creating a Work Order for Finished Goods and By-Products

Create a Work Order

• When creating a work order for the finished good, any associated by-products and their quantities will automatically populate.

Processing the Work Order

• Follow Creating a Work Order and Process Outside Services to process the work order for the finished good and by-products.

• Review the Output By-Products related list.

Lot Number Management

• Lot Numbers for by-products are automatically created using the format: YYYYMMDD.

• If necessary, edit the lot number by navigating to the Output By-Products related list, clicking the OBP number, and selecting a lot or creating a new one.

Cost Allocation Methods for By-Products

1. Fixed Cost Method (Default)

• By default, GoldFinch uses the Fixed Unit Cost entered on the Output By-Product to cost by-products. The remaining costs are allocated to the finished good.

2. Cost Allocation to Both Output Item and By-Products

• If the Auto Allocate By-Product Cost checkbox is checked on the Production Journal, costs are allocated based on the total base quantities of the output item and by-products.

Example:

• Work Order Total Cost: $201.60

• By-Products:

  • Apple Core: $22.40

  • Apple Peels: $89.60

  • Total By-Product Cost: $112.00

• Finished Good: $89.60

(Optional) Allocate Total Costs to Both the Output Item and the By-Product

• Before posting the item journal, click Edit.

• The Item Journal Details Page is displayed

• Click the checkbox next to the Auto Allocate By-Product Cost

• Click Save.

• Post the Item Journal

• The Finished Good and By-Product(s) are now in the Output bin.

• Ledger Entries for By-Products, together with the Output Item, have been created

  • The Is By-Product field will be checked for By-Product output.

  • If the Auto Allocate By-Product Cost field on the Production Journal is not checked, the Fixed By-Product Cost field will be checked on the Item Ledger Entries.

Finish Work Order

When finishing the Work Order, GoldFinch will calculate the By-Product Finished Cost according to the following logic:

Default Option: Fixed By-Product Cost

• GoldFinch will use the Fixed Unit Cost entered on the Output By-Product to cost By-Product items.

• The remaining Finished Cost will be allocated to the Output Item using this formula:

  • Cost of Output Item = Finished Cost - By-Product Finished Cost

See example below:

• Work Order

  • Finished Cost: 201.60

• By-Products:

  • Apple Core

    • Qty = 144

    • Cost = 2.88

  • Apple Peels

    • Qty = 36

    • Cost = 0.36

  • Total By-Product Cost = 3.24

• Output Item: Peeled Apple Snack Box

  • Qty = 144

  • Finished Good Cost = 201.60 - 3.24 = 198.36

Alternate Option: Allocate Total Costs to Both the Output Item and the By-Product

• If the Auto Allocate By-Product Cost is checked on the Production Journal, the Fixed By-Product Cost field will not be checked on the Item Ledger Entries

  • GoldFinch will allocate Finished Cost based on the total base quantities of both the Output Item and the By-Product items using this formula:

    • Cost of By-Product1 = Finished Cost * (Base Quantity of By-Product1 / (Base Quantity of Output Item + Base Quantity of By-Product1 + Base Quantity of By-Product2)

See example below:

• Work Order

  • Finished Cost: 201.60

• By-products:

  • Apple Core

    • Qty = 144

    • Cost = 201.60 * (36/(144+36+144)) = 22.40

  • Apple Peels

    • Qty = 36 Ounces

    • Cost = 201.60 * (144/(144+36+144)) = 89.60

  • Total By-product Cost = 112.00

• Output Item: Peeled Apple Snack Box

  • Qty = 144

  • Finished Good Cost = 201.60 - 112.00= 89.60

Cost Updates

• GoldFinch will update By-Product costs at night using the above logic if the cost of any component is updated.

Article By-Products-from-Work-Orders  ·  Last updated October 02, 2025 · GoldFinch ERP Help Center