diff --git a/erpnext/stock/doctype/stock_entry/stock_entry.py b/erpnext/stock/doctype/stock_entry/stock_entry.py
index 314b9f19d2e..18560fba888 100644
--- a/erpnext/stock/doctype/stock_entry/stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/stock_entry.py
@@ -630,7 +630,7 @@ class StockEntry(StockController, SubcontractingInwardController):
 		bom_cost_allocation_per=None,
 		has_consumption_basis=False,
 	):
-		rate_derived_from_consumption = False
+		has_derived_rate = False
 
 		if d.allow_zero_valuation_rate and d.basic_rate and self.purpose != "Receive from Customer":
 			d.basic_rate = 0.0
@@ -640,26 +640,25 @@ class StockEntry(StockController, SubcontractingInwardController):
 				d.basic_rate = self.get_basic_rate_for_manufactured_item(
 					d.transfer_qty, outgoing_items_cost, has_consumption_basis
 				)
-				rate_derived_from_consumption = has_consumption_basis
+				has_derived_rate = has_consumption_basis
 			elif self.purpose == "Repack":
 				d.basic_rate = self.get_basic_rate_for_repacked_items(d.transfer_qty, outgoing_items_cost)
 				# Repack rate comes from consumed source-warehouse rows, not consumption entries
-				rate_derived_from_consumption = any(item.s_warehouse for item in self.get("items"))
+				has_derived_rate = any(item.s_warehouse for item in self.get("items"))
 
 			if self.bom_no:
 				d.basic_rate *= bom_cost_allocation_per / 100
 		elif d.secondary_item_type and d.bom_secondary_item:
-			cost_allocation_per = frappe.get_value(
-				"BOM Secondary Item", d.bom_secondary_item, "cost_allocation_per"
+			cost_allocation_per = flt(
+				frappe.get_value("BOM Secondary Item", d.bom_secondary_item, "cost_allocation_per")
 			)
-			# Only recalculate when cost is actually allocated; otherwise preserve the
-			# user-entered rate (or fall through to get_valuation_rate below)
-			if cost_allocation_per and flt(d.transfer_qty):
+			if flt(d.transfer_qty):
 				d.basic_rate = (outgoing_items_cost * (cost_allocation_per / 100)) / d.transfer_qty
+				has_derived_rate = True
 
-		# A rate of zero derived from the consumed items is their actual cost, not a missing
-		# rate. Falling back to the item's valuation here would value free inputs as output.
-		if not d.basic_rate and not d.allow_zero_valuation_rate and not rate_derived_from_consumption:
+		# A rate of zero that was derived rather than left unset is a real cost. Falling back to
+		# the item's valuation here would value free inputs, or an unallocated row, as output.
+		if not d.basic_rate and not d.allow_zero_valuation_rate and not has_derived_rate:
 			d.basic_rate = get_valuation_rate(
 				d.item_code,
 				d.t_warehouse,
diff --git a/erpnext/stock/doctype/stock_entry/test_stock_entry.py b/erpnext/stock/doctype/stock_entry/test_stock_entry.py
index 1a6574c9cc7..fe6553176f3 100644
--- a/erpnext/stock/doctype/stock_entry/test_stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/test_stock_entry.py
@@ -2864,6 +2864,59 @@ class TestStockEntry(ERPNextTestSuite):
 		self.assertEqual(flt(se.total_outgoing_value), 1000.0)
 		self.assertEqual(flt(se.value_difference), 0.0)
 
+	def test_secondary_item_with_zero_cost_allocation_carries_no_value(self):
+		"""A BOM that allocates 0% to a secondary item gives the finished good everything."""
+		from erpnext.manufacturing.doctype.work_order.test_work_order import make_wo_order_test_record
+		from erpnext.manufacturing.doctype.work_order.work_order import (
+			make_stock_entry as make_stock_entry_from_wo,
+		)
+
+		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": 0,
+				"process_loss_per": 0,
+			},
+		)
+		bom.insert()
+		bom.submit()
+		self.assertEqual(flt(bom.cost_allocation_per), 100.0)
+
+		make_stock_entry(item_code=rm_item, target=warehouse, qty=100, basic_rate=100)
+		wo = make_wo_order_test_record(
+			production_item=fg_item, bom_no=bom.name, qty=10, skip_transfer=1, source_warehouse=warehouse
+		)
+
+		se = frappe.get_doc(make_stock_entry_from_wo(wo.name, "Manufacture", 10))
+		se.save()
+
+		scrap_row = next(d for d in se.items if d.secondary_item_type)
+		fg_row = next(d for d in se.items if d.is_finished_item)
+
+		self.assertEqual(flt(scrap_row.basic_rate), 0.0)
+		self.assertEqual(flt(scrap_row.basic_amount), 0.0)
+		self.assertEqual(flt(fg_row.basic_amount), 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 (