Most calculation errors on indirect-cost problems happen before you ever multiply by the F&A rate. Candidates rush to add up the budget table, forget to separate two subawards, or treat a $7,500 laboratory instrument as excluded equipment under the 2024 Uniform Guidance when it actually falls below the $10,000 capitalization threshold.
The most reliable habit on any F&A problem is to write down the cost base first, line by line, before touching the rate.
Worked Example 1: Year 1 Research Grant Budget (2024 Uniform Guidance)
Award context & assumptions: A university is preparing a Year 1 budget for a new federal research grant subject to the 2024 revisions to 2 CFR Part 200, and its updated Negotiated Indirect Cost Rate Agreement (NICRA) uses a Modified Total Direct Cost (MTDC) base with a $10,000 equipment capitalization threshold, a $50,000 per-subaward MTDC inclusion cap, and an on-campus Organized Research F&A rate of 55%. No prior-year expenditures exist on either subaward.
| Budget line item | Proposed Year 1 Direct Cost | Included in MTDC Base? | Amount in MTDC Base | Why (2 CFR 200.1 rule) |
|---|---|---|---|---|
| Personnel salaries and wages | $140,000 | Yes | $140,000 | Direct salaries and wages are included in full. |
| Fringe benefits | $42,000 | Yes | $42,000 | Applicable fringe benefits are included in full. |
| Benchtop centrifuge (per-unit cost $8,000) | $8,000 | Yes | $8,000 | Below the $10,000 equipment threshold under 2 CFR 200.1; classified as supplies, so included in MTDC. |
| Confocal imaging system (per-unit cost $45,000) | $45,000 | No | $0 | Equipment ($\ge $10,000$ per unit) is excluded from MTDC. |
| Graduate student tuition remission | $18,000 | No | $0 | Tuition remission is excluded from MTDC. |
| Participant support stipends | $12,000 | No | $0 | Participant support costs are excluded from MTDC. |
| Subaward A (Partner University — Year 1 total $80,000) | $80,000 | First $50,000 only | $50,000 | Up to the first $50,000 of each subaward is included in MTDC ($30,000 excluded). |
| Subaward B (Community Clinic — Year 1 total $35,000) | $35,000 | Yes (under $50,000 cap) | $35,000 | Evaluated separately for each subaward; $35,000 is within Subaward B's $50,000 cap. |
| Total | $380,000 | — | $275,000 | $105,000 excluded from MTDC |
Visible Arithmetic
- Sum Total Direct Costs (TDC): $$$140,000 + $42,000 + $8,000 + $45,000 + $18,000 + $12,000 + $80,000 + $35,000 = $380,000$$
- Sum MTDC Exclusions:
- Confocal imaging system (equipment): $$45,000$
- Graduate tuition remission: $$18,000$
- Participant support stipends: $$12,000$
- Subaward A amount above $50,000: $$80,000 - $50,000 = $30,000$
- Total Exclusions: $$45,000 + $18,000 + $12,000 + $30,000 = $105,000$
- Compute MTDC Base: $$\text{MTDC Base} = $380,000 - $105,000 = $275,000$$
- Apply the 55% Negotiated F&A Rate: $$\text{Indirect (F&A) Costs} = $275,000 \times 0.55 = $151,250$$
- Compute Total Project Costs: $$\text{Total Project Costs} = $380,000 + $151,250 = $531,250$$
Try a Second Example: Year 2 Continuation with Prior Subaward Spend
Now test yourself on Year 2 of the same project (same 2024 Uniform Guidance rules, $10,000 equipment threshold, $50,000 per-subaward cap across the life of each subaward, and 55% F&A rate):
- Direct salaries, fringe, and laboratory supplies: $190,000
- Off-site storage facility rental cost: $10,000
- Subaward A Year 2 budget: $60,000 (remember: Subaward A already spent $80,000 in Year 1)
- Subaward B Year 2 budget: $25,000 (remember: Subaward B already spent $35,000 in Year 1)
Check Your Answer
- Off-site rental cost ($10,000): Excluded in full under 2 CFR 200.1 (rental costs are excluded from MTDC).
- Subaward A ($60,000 in Year 2): Because Subaward A already used its entire $50,000 MTDC inclusion cap in Year 1, $0 of Subaward A's Year 2 budget enters the Year 2 MTDC base ($60,000 excluded).
- Subaward B ($25,000 in Year 2): Subaward B used $35,000 of its $50,000 cap in Year 1, leaving $$50,000 - $35,000 = $15,000$ of remaining cap space in Year 2. Therefore, $15,000 of Subaward B is included in Year 2 MTDC and $10,000 is excluded.
- Year 2 Total Direct Costs: $$190,000 + $10,000 + $60,000 + $25,000 = $285,000$
- Year 2 MTDC Base: $$190,000 + $15,000 = $205,000$
- Year 2 F&A at 55%: $$205,000 \times 0.55 = $112,750$
- Year 2 Total Costs: $$285,000 + $112,750 = $397,750$
You can plug both examples directly into the MTDC & F&A Calculator to inspect the line-by-line table.