diff --git a/erpnext/stock/doctype/stock_entry/stock_entry.py b/erpnext/stock/doctype/stock_entry/stock_entry.py
index b63df53bd32..e9a15a7e40d 100644
--- a/erpnext/stock/doctype/stock_entry/stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/stock_entry.py
@@ -70,6 +70,15 @@ from erpnext.controllers.subcontracting_inward_controller import SubcontractingI
 form_grid_templates = {"items": "templates/form_grid/stock_entry_grid.html"}
 
 
+def is_costed_out_of_finished_item(row) -> bool:
+	"""Whether the row takes its value out of the finished good instead of adding to it.
+
+	A secondary item that is not linked to a BOM has no cost allocation of its own, so it is
+	valued the way the legacy scrap item was: its cost is deducted from the finished good.
+	"""
+	return bool(row.is_legacy_scrap_item or (row.secondary_item_type and not row.bom_secondary_item))
+
+
 class StockEntry(StockController, SubcontractingInwardController):
 	# begin: auto-generated types
 	# This code is auto-generated. Do not modify anything in this block.
@@ -564,7 +573,8 @@ class StockEntry(StockController, SubcontractingInwardController):
 		)
 
 		zero_valuation_items = []
-		for d in self.get("items"):
+		finished_items_last = sorted(self.get("items"), key=lambda row: cint(row.is_finished_item))
+		for d in finished_items_last:
 			if d.s_warehouse or d.set_basic_rate_manually:
 				continue
 
@@ -736,7 +746,9 @@ class StockEntry(StockController, SubcontractingInwardController):
 		self, finished_item_qty, outgoing_items_cost=0, has_consumption_basis=False
 	) -> float:
 		settings = frappe.get_single("Manufacturing Settings")
-		scrap_items_cost = sum([flt(d.basic_amount) for d in self.get("items") if d.is_legacy_scrap_item])
+		scrap_items_cost = sum(
+			[flt(d.basic_amount) for d in self.get("items") if is_costed_out_of_finished_item(d)]
+		)
 
 		if settings.material_consumption:
 			outgoing_items_cost = self._get_rm_cost_for_manufacture(
diff --git a/erpnext/stock/doctype/stock_entry/test_stock_entry.py b/erpnext/stock/doctype/stock_entry/test_stock_entry.py
index 2cd3fde5f84..af4e0f42c9a 100644
--- a/erpnext/stock/doctype/stock_entry/test_stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/test_stock_entry.py
@@ -2759,6 +2759,55 @@ class TestStockEntry(ERPNextTestSuite):
 		self.assertRaises(QualityInspectionRequiredError, receipt("").submit)
 		self.assertRaises(QualityInspectionRequiredError, receipt("Scrap").submit)
 
+	def test_manufacture_balances_secondary_item_added_without_a_bom(self):
+		"""A secondary item with no BOM link is costed out of the finished good, as legacy scrap was."""
+		rm_item = make_item(properties={"is_stock_item": 1}).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"
+
+		make_stock_entry(item_code=rm_item, target=warehouse, qty=10, basic_rate=100)
+
+		se = frappe.new_doc("Stock Entry")
+		se.purpose = se.stock_entry_type = "Manufacture"
+		se.company = "_Test Company"
+		se.append(
+			"items", {"item_code": rm_item, "s_warehouse": warehouse, "qty": 10, "conversion_factor": 1}
+		)
+		se.append(
+			"items",
+			{
+				"item_code": fg_item,
+				"t_warehouse": warehouse,
+				"qty": 10,
+				"is_finished_item": 1,
+				"conversion_factor": 1,
+			},
+		)
+		se.append(
+			"items",
+			{
+				"item_code": scrap_item,
+				"t_warehouse": warehouse,
+				"qty": 5,
+				"secondary_item_type": "Scrap",
+				"conversion_factor": 1,
+			},
+		)
+		se.save()
+
+		scrap_row = se.items[2]
+		self.assertEqual(flt(scrap_row.basic_rate), 20.0)
+		self.assertEqual(flt(scrap_row.basic_amount), 100.0)
+
+		fg_row = se.items[1]
+		self.assertEqual(flt(fg_row.basic_rate), 90.0)
+		self.assertEqual(flt(fg_row.basic_amount), 900.0)
+
+		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 (