Operation Scrap
Operation scrap, which is defined on the bill of material, affects material cost calculations when you run the cost simulation. Enough material must be available at each operation to obtain 100 percent yield at the last operation. When material cost is calculated, the quantity of the components is adjusted accordingly.
This example illustrates the effect of operation scrap on costing:
Parent = A
Component = B
Quantity per = 3
Cost of B = 5.00
Operation scrap = 8 percent
Cost of B rolled into parent item A = 3 × 1.08 × 5 = 16.20