If it is blank or set to N, the system will continut to do as it has always done and post any variance (difference between actual costs into the WO and Finished Production cost out of the WO) to the WIP Variance account resulting in 0 net WIP when closing a WO.
 
If it is set to Y then when the WO is closed, before making the posting to WIP Variance the program first checks to see if there is any remaining stock of the item manufactured on the WO.  If there is, it posts the variance to the parts in stock adjusting the unit cost.  If not, it posts to WIP Variance.  If the WO was for 100 units and there are only 40 left in stock it will post 40% of the variance to those parts and the other 60% to WIP Variance.