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An indirect cost rate represents the ratio between the total indirect costs and benefiting direct costs, after excluding and or reclassifying unallowable costs, and extraordinary or distorting expenditures.ooking at it another way, indirect costs are those costs that are not classified as direct. Direct costs can be identified specifically with particular cost objectives such as a grant, contract, project, function or activity. Direct costs generally include:
While indirect costs are an. important consideration in the analysis of most cost. proposals, the share of total cost that they represent will. vary from firm to firm and industry to industry. For. example, expect indirect costs to represent a larger share. of a cost proposal for industrial production than for.