Calculate indirect costs on a sponsored project budget
To calculate costs when an award specifies indirect costs as a percentage of total direct costs, use the following example:
Consider a sponsored project award with these instructions:
- The total award is $100,000
- Equipment is budgeted at $20,000
- The indirect cost rate is 54%, excluding equipment
- Calculate the amount subject to indirect costs (IDC):
| Total award | $100,000 |
| Minus exclusions (equipment) | -$20,000 |
| Modified total costs | $80,000 |
- Divide the modified total costs by 1.X% (where X=IDC percentage). The result is the dollar amount of direct costs.
- In this example, $80,000 divided by 1.54 equals $51,948 in direct costs.
- Subtract direct costs from the modified total costs amount. The result is the dollar amount of indirect costs.
- In this example, $80,000 minus $51,948 equals $28,052 in indirect costs.
- Allocate amounts and check your math. All allocations should add up to the total award amount.
- In this example, the three allocations add up to $100,000:
- $20,000 to the equipment account
- $51,948 to the remaining expenditure accounts (direct cost)
- $28,052 to the indirect cost account
- In this example, the three allocations add up to $100,000: