dgs definition of indirect cost rates
Once expenses are classified, many companies use the indirect costs ratio, sometimes called the overhead rate, to maintain accountability and to help determine how to allocate administration costs between programs or departments. The indirect cost rate is the ratio of total indirect costs to the applicable direct costs. The higher the ratio for a given department, the greater the share of indirect costs that program should bear. In an effort to maintain efficiency and transparency, some companies set a target value for the indirect cost ratio.