Odoo 18 By-Product Cost Analysis: Complete Manufacturing Guide
By Braincuber Team
Published on March 16, 2026
Manufacturing by-products can significantly impact your cost analysis and profitability calculations. In Odoo 18, properly analyzing by-product cost share helps manufacturers understand true production costs, optimize pricing strategies, and maintain accurate financial records. This complete guide shows you exactly how to set up, configure, and analyze by-product costs in Odoo 18 Manufacturing module.
What You'll Learn:
- Complete Odoo 18 by-product cost analysis setup and configuration
- Bill of Materials (BoM) creation with by-product cost share configuration
- Work center setup and cost calculation methods
- Manufacturing order execution and cost verification
- Journal entry analysis and accounting integration
Understanding By-Product Cost Analysis
Manufacturing is a complex process that often produces by-products alongside primary products. These by-products carry their own production costs that must be properly allocated to ensure accurate cost analysis and financial reporting.
In Odoo 18 Manufacturing module, by-product cost analysis allows you to specify the cost share percentage for by-products, automatically calculating the cost allocation between main products and by-products based on production costs and predefined ratios.
Initial Setup and Configuration
Enable Manufacturing Features
Navigate to Configuration > Settings and enable Work Orders and By-Products options. These features are essential for managing production processes and by-product cost allocation.
Create Products
Set up main products, raw materials, and by-products in the Products tab. For our example: Coffee Powder ($250), Coffee Beans ($40), and Coffee Pulp (by-product).
Configure Product Routes
Set manufacturing as the product route for main products to enable production planning and cost tracking capabilities.
Set Up Work Centers
Create work centers with cost details including employee rates ($50/hour) and work center costs ($100/hour) for accurate cost calculation.
Work Center Configuration
Basic Information
Work center name, tags, code, and working hours. Specify alternative work centers for backup capacity planning.
Cost Configuration
Employee hourly rates ($50) and work center costs ($100/hour) for accurate cost allocation and profitability analysis.
Production Information
Time efficiency, capacity, OEE targets, and setup/cleanup times for realistic production scheduling.
Capacity Planning
Define work center capacity and efficiency metrics for accurate production planning and cost forecasting.
Bill of Materials Creation
Create New BoM
Navigate to Products tab > Bill of Materials > New. Select BoM type as "Manufacture this product" and specify the main product (Coffee Powder).
Add Components
In the Components tab, add raw materials with quantities. Example: 1000 quantities of Coffee Beans at $2 each = $2000 total component cost.
Define Operations
Add operations in the Operations tab: Roasting, Grinding, Blending, and Packing. Each operation takes 60 minutes at the Coffee Mill work center.
Configure By-Products
In the By-products tab, specify Coffee Pulp (50 quantities) with 10% cost share. This allocates 10% of total production cost to the by-product.
Cost Calculation Analysis
| Cost Component | Calculation | Amount |
|---|---|---|
| Raw Materials | 1000 Coffee Beans × $2 | $2,000 |
| Operations Cost | 4 operations × $150 each | $600 |
| Total Production Cost | Raw Materials + Operations | $2,600 |
| By-Product Cost Share | 10% of Total Cost | $260 |
| Final Product Cost | Total Cost - By-Product Cost | $2,340 |
Cost Allocation Formula
Final Product Cost = Total Production Cost - (Total Production Cost × By-Product Cost Share %). This ensures accurate cost allocation between main products and by-products.
Manufacturing Order Execution
Create Manufacturing Order
Navigate to Operations > Manufacturing Orders > New. Select Coffee Powder product, BoM auto-selects, then confirm the order.
Complete Work Orders
Execute all operations (Roasting, Grinding, Blending, Packing). Each operation takes 60 minutes. Total time: 3.998 hours.
Verify Cost Details
Check the Overview smart tab for actual costs: Components ($2,000), Operations ($799.75), Total ($2,799.75), By-Product ($279.98).
Final Cost Calculation
Final Product Cost = $2,799.75 - $279.98 = $2,519.77. This reflects the actual cost after by-product allocation.
PLANNED COSTS (BoM):
- Raw Materials: $2,000.00
- Operations (4 × $150): $600.00
- Total Planned: $2,600.00
- By-Product (10%): $260.00
- Final Product: $2,340.00
ACTUAL COSTS (Manufacturing Order):
- Raw Materials: $2,000.00
- Operations (3.998h × $200/h): $799.75
- Total Actual: $2,799.75
- By-Product (10%): $279.98
- Final Product: $2,519.77
VARIANCE ANALYSIS:
- Cost Variance: $199.75 (7.7% increase)
- Operations Efficiency: 99.95% (planned 4h vs actual 3.998h)
- By-Product Value: $19.98 increase due to higher total cost
Journal Entry and Accounting Integration
Automatic Journal Entry
Odoo automatically creates journal entries when manufacturing orders complete, debiting Stock Valuation and crediting Cost of Production accounts.
Cost Share Recording
The journal entry displays the cost share percentage and amount allocated to by-products, ensuring accurate financial reporting.
Account Classification
Both Cost of Production and Stock Valuation accounts are classified as Current Assets, following standard accounting principles.
Financial Reporting
By-product costs are properly reflected in financial statements, enabling accurate profitability analysis and cost management.
Best Practices for By-Product Cost Analysis
Accurate Cost Allocation
Use realistic cost share percentages based on market value or production complexity. Regular review ensures allocation accuracy.
Work Center Cost Updates
Regularly update work center costs and employee rates to reflect actual expenses and maintain accurate cost calculations.
Regular Cost Reviews
Monitor actual vs planned costs to identify inefficiencies and optimize production processes for better cost control.
Inventory Valuation
Ensure by-products are properly valued in inventory for accurate balance sheet reporting and asset management.
Frequently Asked Questions
How is by-product cost share calculated in Odoo 18?
By-product cost share is calculated as a percentage of total production costs (raw materials + operations). The system automatically allocates this percentage to by-products and reduces the main product cost accordingly.
Can I use different cost share methods besides percentage?
Odoo 18 primarily uses percentage-based cost share for by-products. You can specify the percentage in the BoM, and the system automatically calculates the cost allocation based on total production costs.
How do work center costs affect by-product cost analysis?
Work center costs (employee rates + machine costs) are included in total production costs. Higher work center costs increase the total cost, which proportionally increases the by-product cost allocation.
What journal entries are created for by-product costs?
Odoo creates automatic journal entries debiting Stock Valuation account and crediting Cost of Production account. The by-product cost share is recorded and reflected in the financial statements.
How do I verify cost calculations in manufacturing orders?
Check the Overview smart tab in completed manufacturing orders. It shows detailed cost breakdowns including components, operations, by-products, and final product costs with actual vs planned comparisons.
Need Help with Odoo Manufacturing Cost Analysis?
Our experts can help you implement comprehensive by-product cost analysis in Odoo 18, ensuring accurate cost allocation and improved profitability insights for your manufacturing operations.