diff --git a/erpnext/manufacturing/doctype/bom/bom.py b/erpnext/manufacturing/doctype/bom/bom.py
index e75d82ba99..c6a3f1fcea 100644
--- a/erpnext/manufacturing/doctype/bom/bom.py
+++ b/erpnext/manufacturing/doctype/bom/bom.py
@@ -376,7 +376,7 @@ class BOM(Document):
 				if not d.description:
 					d.description = frappe.db.get_value('Operation', d.operation, 'description')
 
-def get_bom_items_as_dict(bom, company, qty=1, fetch_exploded=1):
+def get_bom_items_as_dict(bom, company, qty=1, fetch_exploded=1, fetch_scrap_items=0):
 	item_dict = {}
 
 	# Did not use qty_consumed_per_unit in the query, as it leads to rounding loss
@@ -405,53 +405,13 @@ def get_bom_items_as_dict(bom, company, qty=1, fetch_exploded=1):
 		query = query.format(table="BOM Explosion Item",
 			conditions="""and item.is_sub_contracted_item = 0""")
 		items = frappe.db.sql(query, { "qty": qty,	"bom": bom }, as_dict=True)
+	elif fetch_scrap_items:
+		query = query.format(table="BOM Scrap Item", conditions="")
+		items = frappe.db.sql(query, { "qty": qty, "bom": bom }, as_dict=True)
 	else:
 		query = query.format(table="BOM Item", conditions="")
 		items = frappe.db.sql(query, { "qty": qty, "bom": bom }, as_dict=True)
 
-	# make unique
-	for item in items:
-		if item_dict.has_key(item.item_code):
-			item_dict[item.item_code]["qty"] += flt(item.qty)
-		else:
-			item_dict[item.item_code] = item
-
-	for item, item_details in item_dict.items():
-		for d in [["Account", "expense_account", "default_expense_account"],
-			["Cost Center", "cost_center", "cost_center"], ["Warehouse", "default_warehouse", ""]]:
-				company_in_record = frappe.db.get_value(d[0], item_details.get(d[1]), "company")
-				if not item_details.get(d[1]) or (company_in_record and company != company_in_record):
-					item_dict[item][d[1]] = frappe.db.get_value("Company", company, d[2]) if d[2] else None
-
-	return item_dict
-
-def get_bom_scrap_items_as_dict(bom, company, qty=1, fetch_exploded=1):
-	item_dict = {}
-
-	# Did not use qty_consumed_per_unit in the query, as it leads to rounding loss
-	query = """select
-				bom_scrap_item.item_code,
-				item.item_name,
-				sum(bom_scrap_item.qty/ifnull(bom.quantity, 1)) * %(qty)s as qty,
-				item.description,
-				item.image,
-				item.stock_uom,
-				item.default_warehouse,
-				item.expense_account as expense_account,
-				item.buying_cost_center as cost_center
-			from
-				`tabBOM Scrap Item` bom_scrap_item, `tabBOM` bom, `tabItem` item
-			where
-				bom_scrap_item.parent = bom.name
-				and bom_scrap_item.docstatus < 2
-				and bom_scrap_item.parent = %(bom)s
-				and item.name = bom_scrap_item.item_code
-				and is_stock_item = 1
-				group by item_code, stock_uom"""
-
-	items = frappe.db.sql(query, { "qty": qty, "bom": bom }, as_dict=True)
-
-	# make unique
 	for item in items:
 		if item_dict.has_key(item.item_code):
 			item_dict[item.item_code]["qty"] += flt(item.qty)
diff --git a/erpnext/manufacturing/doctype/production_order/production_order.js b/erpnext/manufacturing/doctype/production_order/production_order.js
index d0e0d86d2e..d8eb25b4c3 100644
--- a/erpnext/manufacturing/doctype/production_order/production_order.js
+++ b/erpnext/manufacturing/doctype/production_order/production_order.js
@@ -225,6 +225,10 @@ $.extend(cur_frm.cscript, {
 				$.each(["description", "stock_uom", "bom_no"], function(i, field) {
 					cur_frm.set_value(field, r.message[field]);
 				});
+
+				if(r.message["set_scrap_wh_mandatory"]){
+					cur_frm.toggle_reqd("scrap_warehouse", true);
+				}
 			}
 		});
 	},
@@ -260,7 +264,12 @@ $.extend(cur_frm.cscript, {
 	bom_no: function() {
 		return this.frm.call({
 			doc: this.frm.doc,
-			method: "set_production_order_operations"
+			method: "set_production_order_operations",
+			callback: function(r) {
+				if(r.message["set_scrap_wh_mandatory"]){
+					cur_frm.toggle_reqd("scrap_warehouse", true);
+				}
+			}
 		});
 	},
 
diff --git a/erpnext/manufacturing/doctype/production_order/production_order.py b/erpnext/manufacturing/doctype/production_order/production_order.py
index a0dc55433d..3934935206 100644
--- a/erpnext/manufacturing/doctype/production_order/production_order.py
+++ b/erpnext/manufacturing/doctype/production_order/production_order.py
@@ -222,6 +222,8 @@ class ProductionOrder(Document):
 		self.set('operations', operations)
 		self.calculate_time()
 
+		return check_if_scrap_warehouse_mandatory(self.bom_no)
+
 	def calculate_time(self):
 		bom_qty = frappe.db.get_value("BOM", self.bom_no, "quantity")
 
@@ -457,11 +459,25 @@ def get_item_details(item):
 		return {}
 
 	res = res[0]
+
 	res["bom_no"] = frappe.db.get_value("BOM", filters={"item": item, "is_default": 1})
 	if not res["bom_no"]:
 		variant_of= frappe.db.get_value("Item", item, "variant_of")
 		if variant_of:
 			res["bom_no"] = frappe.db.get_value("BOM", filters={"item": variant_of, "is_default": 1})
+
+	res.update(check_if_scrap_warehouse_mandatory(res["bom_no"]))
+
+	return res
+
+@frappe.whitelist()
+def check_if_scrap_warehouse_mandatory(bom_no):
+	res = {"set_scrap_wh_mandatory": False }
+	bom = frappe.get_doc("BOM", bom_no)
+
+	if len(bom.scrap_items) > 0:
+		res["set_scrap_wh_mandatory"] = True
+
 	return res
 
 @frappe.whitelist()
diff --git a/erpnext/stock/doctype/stock_entry/stock_entry.py b/erpnext/stock/doctype/stock_entry/stock_entry.py
index 98924dbc60..a6f702d4b8 100644
--- a/erpnext/stock/doctype/stock_entry/stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/stock_entry.py
@@ -276,6 +276,13 @@ class StockEntry(StockController):
 				if not d.t_warehouse:
 					raw_material_cost += flt(d.basic_amount)
 
+			# get scrap items basic rate
+			if d.bom_no:
+				if not flt(d.basic_rate) and getattr(self, "pro_doc", frappe._dict()).scrap_warehouse == d.t_warehouse:
+					basic_rate = flt(get_incoming_rate(args), self.precision("basic_rate", d))
+					if basic_rate > 0:
+						d.basic_rate = basic_rate
+
 		number_of_fg_items = len([t.t_warehouse for t in self.get("items") if t.t_warehouse])
 		if (fg_basic_rate == 0.0 and number_of_fg_items == 1) or update_finished_item_rate:
 			self.set_basic_rate_for_finished_goods(raw_material_cost)
@@ -283,7 +290,7 @@ class StockEntry(StockController):
 	def set_basic_rate_for_finished_goods(self, raw_material_cost):
 		if self.purpose in ["Manufacture", "Repack"]:
 			for d in self.get("items"):
-				if d.bom_no or d.t_warehouse:
+				if (d.bom_no or d.t_warehouse) and (getattr(self, "pro_doc", frappe._dict()).scrap_warehouse != d.t_warehouse):
 					d.basic_rate = flt(raw_material_cost / flt(d.transfer_qty), d.precision("basic_rate"))
 					d.basic_amount = flt(raw_material_cost, d.precision("basic_amount"))
 
@@ -302,7 +309,7 @@ class StockEntry(StockController):
 
 	def update_valuation_rate(self):
 		for d in self.get("items"):
-			d.amount = flt(d.basic_amount + flt(d.additional_cost), d.precision("amount"))
+			d.amount = flt(flt(d.basic_amount) + flt(d.additional_cost), d.precision("amount"))
 			d.valuation_rate = flt(
 				flt(d.basic_rate)
 				+ (flt(d.additional_cost) / flt(d.transfer_qty)),
@@ -617,11 +624,11 @@ class StockEntry(StockController):
 		return item_dict
 	
 	def get_bom_scrap_material(self, qty):
-		from erpnext.manufacturing.doctype.bom.bom import get_bom_scrap_items_as_dict
+		from erpnext.manufacturing.doctype.bom.bom import get_bom_items_as_dict
 		
 		# item dict = { item_code: {qty, description, stock_uom} }
-		item_dict = get_bom_scrap_items_as_dict(self.bom_no, self.company, qty=qty,
-			fetch_exploded = self.use_multi_level_bom)
+		item_dict = get_bom_items_as_dict(self.bom_no, self.company, qty=qty,
+			fetch_exploded = 0, fetch_scrap_items = 1)
 
 		for item in item_dict.values():
 			item.from_warehouse = ""