Set up the budgets for ledger accounts and financial dimensions. The indirect costs are unique for the Government contracting solution.

A cost or expense that is not directly traceable to, for example, a department, product, activity, or customer, is considered an indirect cost. Therefore, indirect costs and expenses are allocated to, for example, the department or product. Example: a manufacturing department that molds plastic has some costs that are directly traceable to it.

Direct costs can be the wages and fringe benefits of direct labor working exclusively in that department. However, the heat for the entire building appears only on one utility bill. The heating bill is an indirect cost to the molding department. Generally, the heating bill will be allocated to all departments based on the number of square feet each department occupies.

Cost principles include regulations that require institutions to disclose what costs are charged to sponsored projects and if these are direct or indirect costs. One of the determining factors for a cost to be considered as direct or indirect depends on if the costs are explicitly budgeted and justified in the proposal. Also, that the sponsor accepts the proposed cost as part of the project direct costs. Therefore, it is imperative that the contractor pre-determines the type of cost as allowable and that it can be claimed directly and includes the cost in the budget proposal.

Standard procedure

1.	Go to Budgeting > Budget register entries.
2.	In the list, select the budget register entry.
3.	In the list, select the budget entry line.
4.	Click Allocate indirect costs.
5.	In the Allocation basis ID field, enter or select a value.
6.	In the Allocation quantity field, enter a number.
7.	In the Amount per unit field, enter a number.
8.	Click Transfer to budget line.