What is the difference between by-product and co-product and
how do you differentiate them in a BOM?
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Answer Posted / amit agrawal
A co-product is specifically planned to take advantage of
process contraints. A good example is casting/foundry
industry,where mold size is fixed. If your mold box size is
10 X 10 ft and your casting size is 5 X 5 ft, you will pour
less metal, get less Kg of output from your molding line,
and so on. Alternatively, you can design your mold in such
a way that you produce the main casting in one portion, and
also use the same mold to produce another casting e.g.
small bearing, thus improving the mold utilisation.Since
two products are produced at the same time using same work
centre, the later is called as co-product.And hence the
costs are allocated to the two in some specific ratio (e.g.
80-20) and settlement profile is created accordingly.
By-product is an undesired item arising out of the process
of manufacturing,and generally referred to as scrap.
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