PRINCE2F Practice Question: Overview of PRINCE2 and the project environment
A project is forecast to exceed its cost tolerance. According to PRINCE2, what should the Project Manager do?
⚠ Common exam trap
PRINCE2F often tests the misconception that the Project Manager can adjust budget or continue within a stage despite a forecast tolerance breach — the exam expects recognition that any forecast exception must be escalated to the Project Board via an Exception Report.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Raise an Exception Report to the Project Board and await their direction before proceeding
In PRINCE2, cost tolerance is defined at the stage and project levels within the Business Case and Project Plan. When a forecast indicates the stage or project will exceed its cost tolerance, this constitutes an exception, and the Project Manager must produce an Exception Report and escalate to the Project Board, which decides whether to approve a revised plan, change scope, or stop the project. The Project Manager cannot unilaterally increase budget or continue past tolerance.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Raise an Exception Report to the Project Board and await their direction before proceeding
Why this is correct
Exceeding cost tolerance breaches the tolerance delegated to the Project Manager, so the matter must escalate to the Project Board via an Exception Report, which presents options and awaits direction. Proceeding without approval would violate the manage by exception principle governing stage-level authority.
- ✗
Increase the project budget to absorb the additional cost and continue with the current Stage Plan
Why it's wrong here
PRINCE2 requires the Project Manager to escalate a forecast tolerance breach to the Project Board via an Exception Report; the Project Manager cannot unilaterally raise the budget, which sits within the Board's tolerance-setting authority. Increasing budget suits a Board-approved Exception Plan.
- ✗
Continue with the current Stage Plan and report the cost overrun in the next Highlight Report
Why it's wrong here
Forecast breach of a Stage-level tolerance triggers an Exception Report to the Project Board immediately, not deferred Highlight Report commentary. Highlight Reports suit routine progress within tolerance; once a tolerance is forecast to be exceeded, the Project Manager must escalate rather than wait.
- ✗
Close the project immediately as the Business Case is no longer viable
Why it's wrong here
Closing the project is a Project Board decision taken only if the Business Case no longer justifies continuation; the Project Manager must first escalate via an Exception Report. Premature closure tempts when the overrun appears fatal, but viability is assessed by the Board, not assumed.
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Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official PeopleCert exam blueprint
This PRINCE2F practice question is part of Courseiva's free PeopleCert certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the PRINCE2F exam.