What Did You Kill?
First of all, what is it you're trying to butcher? Dwarves will only butcher non-sentient creatures (unless you edit the raws).
The title of the question asks about a forgotten beast, which is non-sentient and therefore butcherable, but the body asks about a were-chinchilla, which is a type of night creature. Unfortunately, night creatures are sentient and cannot be butchered.
If you did kill something non-sentient, keep reading to find out how to turn its bones into awesome crafts.
Getting the Bones
First, if the forgotten beast was killed outside your fort on the surface, your dwarves won't collect and butcher the corpse unless you allow refuse collection from outside. To do that, press o to open the Standing Orders screen → r to open Refuse → o to allow Dwarves Gather Refuse From Outside
Next, ensure that you've built at least one Butcher's Shop (workshops → Butcher's shop). If you have at least one dwarf with the Butcher skill enabled, the beast will eventually be cut up into its components.
Congratulations on obtaining some forgotten beast bones! To turn them into crafts, you have two options:
Option 1: Custom Stockpile
- Create a custom stockpile (p then c) and allow only the materials you want to use in crafts
- Designate that stockpile to give to the workshop where you want the crafts created. From now on, that workshop will only create crafts using those materials found in this stockpile
Option 2: Work Order
- Assign a dwarf to be a Manager
- Create a New Work Order j → m → q
- Choose which craft/good you want created
- Hit d to set order details like materials, and specify that you want to use forgotten beast bone
Enjoy your dwarfy new forgotten beast bone mug or whatever!