When calculating indirect costs, which base amount is used?

The correct choice focuses on the base amount of the contract for calculating indirect costs because indirect costs are typically allocated based on a defined base that reflects the cost structure of the contract. This base provides a consistent financial metric for distributing indirect costs, such as overhead or administrative expenses, across the contract.

In many instances, the base amount used is derived from the total estimated expenses or costs associated with the project but specified in the context of the contract. By using the base amount of the contract, it ensures that the calculation aligns directly with the financial arrangement agreed upon between the parties, making it more equitable and manageable for both the contractor and the contracting agency.

The use of projected future revenues, total cost of the project, or budgeted expenses may not consistently apply across different contracts or may not accurately reflect the obligations established within the contract. They could introduce variability and not align with the specific financial framework of indirect cost allocation that is typically stipulated by federal regulations and guidelines. Therefore, focusing on the base amount of the contract offers a structured and standardized approach for calculating indirect costs.