Re: When I create a work order for a FLoc which has only 1 equipment installed, the system copies the equipment and makes it the reference object of the order.

I do not think that

IW31 initial screen with Functional Location alone, would bring the only Equipment under the F/Locn also to the Reference Object  of the Order

is a standard behaviour.

Now please give pictures of

IW31 initial screen

Reference Object screen

Structure screen of the F/Locn showing the only Equipment.

so that, by the time others join the discussion, full details are available.