ECONOMICS

Detailed explanation-1: -Calculating indirect costs In the budget, indirect costs are calculated by multiplying the sponsor’s overhead rate by the direct cost base.

Detailed explanation-2: -An indirect cost rate represents the ratio between the total indirect costs and benefiting direct costs, after excluding and or reclassifying unallowable costs, and extraordinary or distorting expenditures. (i.e., capital expenditures and major contracts and subgrants).

Detailed explanation-3: -The correct answer is B. The budgeted total direct labor cost is calculated by multiplying the direct labor cost rate and budgeted direct labor hours.

Detailed explanation-4: -Indirect costs include supplies, utilities, office equipment rental, desktop computers and cell phones. Much like direct costs, indirect costs can be fixed or variable. Fixed indirect costs include expenses such as rent; variable indirect costs include fluctuating expenses such as electricity and gas.