Question

An institution has an indirect cost rate of 40%. A research project is budgeted at $125,000 in direct costs including an item of equipment at $25,000. The equipment is the only item excluded from the indirect cost base. What is the total cost for the project?

a. $135,000
b. $150,000
c. $165,000
d. $175,000

Answer 1

The total cost for the project is $165,000.

Step-by-step explanation:

To calculate the total cost of the project, you need to add the direct costs and the indirect costs. The direct costs are budgeted at $125,000, and the indirect cost rate is 40%. As the equipment is the only item excluded from the indirect cost base, you need to subtract its cost ($25,000) from the total direct costs. So, the indirect costs are 40% of $100,000 (direct costs minus excluded equipment cost), which is $40,000. Adding the direct costs and indirect costs, the total cost for the project is $125,000 + $40,000 = $165,000. Therefore, the correct answer is c. $165,000.