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Sponsored Project Award Allocations: Calculating Direct and Indirect Costs

See an example of how to calculate direct and indirect costs for a sponsored project award budget allocation.

Most award budgets specify the approved dollar amounts for direct and indirect costs, but some give only percentages.

To calculate costs when an award specifies indirect costs as a percentage of total direct costs, use the following example.

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 15%, excluding equipment
  1. Calculate the amount subject to indirect costs (IDC):

    Total award $100,000
    Minus exclusions (equipment) -$20,000
    Modified total costs $80,000
  2. 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 1.15 equals $69,565 in direct costs.
  3. Subtract direct costs from the modified total costs amount. The result is the dollar amount of indirect costs.
    • In this example, $80,000 minus $69,565 equals $10,435 in indirect costs.
  4. 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
      • $69,565 to the remaining expenditure accounts (direct cost)
      • $10,435 to the indirect cost account