Indirect Cost Calculator
Enter your indirect cost pool, allocation base, and project direct cost to calculate the indirect cost rate, allocated indirect cost, and total project cost. Supports both percentage-based rates (pool ÷ direct $ base) and hourly rates (pool ÷ labor hours) — with a full project cost waterfall and step-by-step breakdown.
Enter your cost data
Select a preset or enter your own values. Choose % or $/hr rate mode based on your allocation base type.
What to do next
Want to understand indirect cost calculations in depth?
Step-by-step
Tips & notes
What this calculator does
The Indirect Cost Calculator computes the indirect cost rate from your pool and allocation base, then applies that rate to the project direct cost to get the allocated indirect cost and total project cost. It supports both percentage-based rates (when the base is a dollar amount) and hourly rates (when the base is labor or machine hours).
The project cost waterfall shows exactly how indirect costs are layered onto direct costs to reach the total. The "Indirect % of total" metric distinguishes the allocated rate from the actual share of total cost — a common source of confusion in cost accounting.
Indirect cost formulas
e.g. $80,000 ÷ $200,000 = 40%
e.g. $120,000 ÷ 4,000 hours = $30/hr
e.g. $50,000 × 40% = $20,000
e.g. $50,000 + $20,000 = $70,000
e.g. $20,000 ÷ $70,000 = 28.6% (not 40% — rate ≠ share of total)
Example calculations
Rate = $80,000 ÷ $200,000 = 40%
Project indirect = $50,000 × 40% = $20,000
Total project cost = $50,000 + $20,000 = $70,000
Rate = $45,000 ÷ $150,000 (MTDC) = 30%
Project indirect = $30,000 × 30% = $9,000
Total project cost = $30,000 + $9,000 = $39,000
Rate = $120,000 ÷ 4,000h = $30/hr
Project hours = 500h → Indirect = 500 × $30 = $15,000
Rate = $300,000 ÷ $1,000,000 = 30%
Project indirect = $80,000 × 30% = $24,000
Total project cost = $80,000 + $24,000 = $104,000
Frequently asked questions
What is the indirect cost rate formula?
Indirect Cost Rate = Indirect Cost Pool ÷ Allocation Base. The pool is the total of all overhead and general expenses not directly attributable to a specific project. The rate is then applied to each project: Project Indirect Cost = Project Direct Cost × Rate. Total project cost = Direct + Indirect.
What is the difference between % rate mode and $/hr rate mode?
% Rate mode is used when your allocation base is a dollar amount — direct labor cost, total direct cost, or MTDC. The result is a percentage. $/hr Rate mode is used when your base is hours (labor hours or machine hours). The result is a dollar amount per hour, then multiplied by project hours to get allocated indirect cost.
What should I use as the allocation base?
Choose the base that best reflects how projects consume your indirect resources. Direct labor cost is most common for service and professional firms. Total direct cost is used for G&A allocation and nonprofits. Labor hours or machine hours work well for manufacturing and engineering. Federal grants typically require MTDC (Modified Total Direct Cost) — total direct cost excluding equipment, subcontracts over $25,000, tuition, and off-site rent.
Why is the indirect cost rate different from the indirect percentage of total cost?
The rate is a ratio of indirect to direct costs. A 40% rate means $40 of indirect per $100 of direct. But the total project cost is $140, so indirect is only 28.6% of total ($40 ÷ $140). The rate overstates the share because it is applied to direct costs only, not total costs. This calculator shows both figures separately to avoid this confusion.
How often should I recalculate the indirect cost rate?
Rates are typically set annually — calculated prospectively at the start of the fiscal year based on budgeted costs, then reconciled against actual costs at year-end. If actual indirect costs diverge significantly from the rate applied (over- or under-applied overhead), adjust the rate for the next period. Government contractors may use provisional rates mid-year that are later finalized.
What is the difference between indirect cost and overhead?
Overhead is a type of indirect cost — specifically the indirect costs of production or service delivery departments. Indirect cost is the broader term that also includes G&A (general and administrative) costs and fringe benefits. In casual use, the terms are often interchangeable. In government contracting and grant accounting, they are formally separate pools with separate rates applied in sequence.
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Disclaimer
This calculator is for educational and planning purposes only. Actual indirect cost rates should be calculated using audited financial data and reviewed against applicable accounting standards (GAAP, FAR, 2 CFR 200) and your organization's approved cost allocation methodology. For federal grants and government contracts, indirect rates must be negotiated and documented per agency requirements. Results do not constitute accounting or legal advice.