I am often asked about indirect costs and how to calculate indirect cost rates that are DCAA compliant or compliant with FAR 31.2. Indirect costs is a highly complex and often heavily debated subject with auditors. It is probably the most contentious subject under accounting for government contracts.
I hope to answer those questions on this page.
For starters, please fine below tables of indirect cost rate calculations for a typical business using the three rate system, Fringe, Overhead and G&A. Keep in mind the number and structure of indirect rates can vary from contractor to contractor depending on specific circumstances. The tables below are not reflective of any contractor or client. They are simplified illustrations to show the concept of compliant indirect rate calculations. Actual indirect rate computations will vary and will include many more accounts and may be a bit more complex. The tables below are illustrations only, the figures are ficticious. The rate calculations are both DCAA and FAR compliant.
Table 1 – Fringe Rate Calculation Example (Illustrative Purposes Only)
|Total Fringe Pool||$60,000|
|Total Allocation Base||$145,000||$60,000|
Table 2 – Overhead Rate (Illustrative Purposes Only)
|Less: Unallowable Costs||(207)|
|Fringe Allocated to OH Labor (Fringe Rate * OH Labor)||6,207|
|Total Overhead Pool||$91,000|
|Fringe Applicable to Direct Labor||33,103||22,429|
to IR&D/B&P Labor
|Total Allocation Base||$134,310||$91,000|
Table 3 – General And Administrative (G&A) (Illustrative Purposes Only)
|Less: Unallowable Costs||(5,000)|
|Fringe Allocated to G&A Labor (Fringe Rate * G&A Labor)||12,414|
|Fringe Allocated to IR&D/B&P Labor||6,207|
|Overhead Allocated to IR&D/B&P Labor||10,163|
|Direct Labor||$ 80,000||$17,251|
|Fringe Applicable to Direct Labor||33,103||7,139|
|OH Applicable to
|OH Applicable to Fringe||22,428||4,837|
|Unallowable OH Costs||207||