diff --git a/erpnext/stock/doctype/stock_entry/stock_entry.py b/erpnext/stock/doctype/stock_entry/stock_entry.py
index e9a15a7e40d..314b9f19d2e 100644
--- a/erpnext/stock/doctype/stock_entry/stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/stock_entry.py
@@ -913,7 +913,9 @@ class StockEntry(StockController, SubcontractingInwardController):
 
 		for d in self.items:
 			if d.t_warehouse and not d.s_warehouse:
-				if self.purpose == "Repack" or d.item_code == finished_item:
+				if d.secondary_item_type or d.is_legacy_scrap_item:
+					d.is_finished_item = 0
+				elif self.purpose == "Repack" or d.item_code == finished_item:
 					d.is_finished_item = 1
 			else:
 				d.is_finished_item = 0
diff --git a/erpnext/stock/doctype/stock_entry/test_stock_entry.py b/erpnext/stock/doctype/stock_entry/test_stock_entry.py
index af4e0f42c9a..1a6574c9cc7 100644
--- a/erpnext/stock/doctype/stock_entry/test_stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/test_stock_entry.py
@@ -2808,6 +2808,62 @@ class TestStockEntry(ERPNextTestSuite):
 		self.assertEqual(flt(se.total_outgoing_value), 1000.0)
 		self.assertEqual(flt(se.value_difference), 0.0)
 
+	def test_repack_allocates_cost_to_secondary_item(self):
+		"""A Repack secondary item takes its own BOM share, not the finished good's."""
+		rm_item = make_item(properties={"is_stock_item": 1, "valuation_rate": 100}).name
+		fg_item = make_item(properties={"is_stock_item": 1}).name
+		scrap_item = make_item(properties={"is_stock_item": 1, "valuation_rate": 20}).name
+		warehouse = "_Test Warehouse - _TC"
+
+		bom = frappe.get_doc(
+			{
+				"doctype": "BOM",
+				"item": fg_item,
+				"currency": "INR",
+				"quantity": 10,
+				"company": "_Test Company",
+			}
+		)
+		bom.append("items", {"item_code": rm_item, "qty": 10})
+		bom.append(
+			"secondary_items",
+			{
+				"secondary_item_type": "Scrap",
+				"item_code": scrap_item,
+				"item_name": scrap_item,
+				"qty": 5,
+				"cost_allocation_per": 25,
+				"process_loss_per": 0,
+			},
+		)
+		bom.insert()
+		bom.submit()
+		self.assertEqual(flt(bom.cost_allocation_per), 75.0)
+
+		make_stock_entry(item_code=rm_item, target=warehouse, qty=100, basic_rate=100)
+
+		se = frappe.new_doc("Stock Entry")
+		se.purpose = se.stock_entry_type = "Repack"
+		se.company = "_Test Company"
+		se.from_bom = 1
+		se.bom_no = bom.name
+		se.fg_completed_qty = 10
+		se.from_warehouse = warehouse
+		se.to_warehouse = warehouse
+		se.get_items()
+		se.save()
+
+		fg_row = next(d for d in se.items if d.is_finished_item)
+		scrap_row = next(d for d in se.items if d.secondary_item_type)
+
+		self.assertFalse(scrap_row.is_finished_item)
+		self.assertEqual(flt(scrap_row.basic_amount), 250.0)
+		self.assertEqual(flt(fg_row.basic_amount), 750.0)
+
+		self.assertEqual(flt(se.total_incoming_value), 1000.0)
+		self.assertEqual(flt(se.total_outgoing_value), 1000.0)
+		self.assertEqual(flt(se.value_difference), 0.0)
+
 	def _make_wo_for_free_raw_material(self, rm_item, fg_item, bom_no):
 		from erpnext.manufacturing.doctype.work_order.test_work_order import make_wo_order_test_record
 		from erpnext.manufacturing.doctype.work_order.work_order import (