Question

What is the F&A that will be charged to the sponsor if you have direct costs of $100,000, a $25,000 piece of equipment, an F&A rate of 50% (MTDC), with the sponsor limiting your F&A to 10% of total direct cost?

a. $7,500
b. $10,000
c. $37,500
d. $50,000

Answer 1

The F&A charged to the sponsor is $10,000 because the sponsor has limited F&A to 10% of total direct costs, and when equipment is excluded from MTDC, the applicable direct cost base is $75,000.

Step-by-step explanation:

The F&A (Facilities & Administrative) costs that will be charged to the sponsor, given direct costs of $100,000 which includes a $25,000 piece of equipment, and an F&A rate of 50% (MTDC), but with the sponsor limiting F&A to 10% of total direct costs, can be calculated as follows:

First, since the piece of equipment is typically excluded from MTDC, we subtract that from the direct costs: $100,000 - $25,000 = $75,000.

The sponsor limits the F&A to 10% of total direct costs, so we take 10% of the original total direct costs, which is: 10% of $100,000 = $10,000.

Therefore, the F&A charged to the sponsor will be $10,000, which corresponds to option b.