- A
Continue with the current plan and report the cost overrun in the next Highlight Report
Why wrong: Continuing without escalation violates management by exception.
- B
Raise an Exception Report to the Project Board and await their direction
This is the correct escalation procedure.
- C
Increase the project budget to absorb the additional cost and continue with the current plan
Why wrong: The PM cannot unilaterally increase the budget; that requires Board approval.
- D
Close the project immediately as the Business Case is no longer viable
Why wrong: A tolerance breach does not automatically mean the Business Case is unviable.
Question 1,397 of 1,731
Exceeding Cost Tolerance: Project Manager Response
This PRINCE2F practice question tests your understanding of prince2 practices. The scenario asks you to isolate a root cause — eliminate options that address a different problem before choosing. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A project is forecast to exceed its cost tolerance. What should the Project Manager do?
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
In PRINCE2, when a project forecasts exceeding its cost tolerance, the Project Manager must escalate the issue to the Project Board by raising an Exception Report. This is because tolerances are delegated limits; exceeding them requires board-level decision-making. Option B correctly follows the PRINCE2 exception management process, ensuring the board can assess the impact on the Business Case and authorize corrective action.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Continue with the current plan and report the cost overrun in the next Highlight Report
Why it's wrong here
Continuing without escalation violates management by exception.
- ✓
Raise an Exception Report to the Project Board and await their direction
Why this is correct
This is the correct escalation procedure.
Related concept
Read the scenario before looking for a memorised answer.
- ✗
Increase the project budget to absorb the additional cost and continue with the current plan
Why it's wrong here
The PM cannot unilaterally increase the budget; that requires Board approval.
- ✗
Close the project immediately as the Business Case is no longer viable
Why it's wrong here
A tolerance breach does not automatically mean the Business Case is unviable.
Common exam traps
Common exam trap: answer the scenario, not the keyword
PRINCE2 often tests the misconception that the Project Manager can handle tolerance breaches independently or defer reporting, but PRINCE2 mandates immediate escalation to the Project Board via an Exception Report when tolerances are forecast to be exceeded.
Detailed technical explanation
How to think about this question
Under PRINCE2, cost tolerance is a delegated authority set by the Project Board in the Project Plan. When a forecast breach occurs, the Project Manager must raise an Exception Report detailing the cause, impact, and options (e.g., reduce scope, request additional funds). The board then decides whether to approve a revised plan via an Exception Plan, which replaces the current Stage Plan. This process ensures the Business Case remains viable and aligns with the 'manage by exception' principle, preventing unauthorized escalation of costs.
KKey Concepts to Remember
- Read the scenario before looking for a memorised answer.
- Find the constraint that changes the correct option.
- Eliminate answers that are true in general but not in this case.
TExam Day Tips
- Watch for words such as best, first, most likely and least administrative effort.
- Review why wrong options are wrong, not only why the correct option is correct.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
How this comes up in practice
A practitioner preparing for the PRINCE2F exam encounters this exact type of scenario on the job. The correct answer here is not the most general option — it is the best answer for the specific constraint described. Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option. Real exam questions reward reading the full scenario before eliminating options, because the constraint defines which answer fits.
What to study next
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FAQ
Questions learners often ask
What does this PRINCE2F question test?
PRINCE2 Practices — This question tests PRINCE2 Practices — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: Raise an Exception Report to the Project Board and await their direction — In PRINCE2, when a project forecasts exceeding its cost tolerance, the Project Manager must escalate the issue to the Project Board by raising an Exception Report. This is because tolerances are delegated limits; exceeding them requires board-level decision-making. Option B correctly follows the PRINCE2 exception management process, ensuring the board can assess the impact on the Business Case and authorize corrective action.
What should I do if I get this PRINCE2F question wrong?
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
What is the key concept behind this question?
Read the scenario before looking for a memorised answer.
About these practice questions
Courseiva creates original exam-style practice questions with explanations and wrong-answer analysis. It does not publish real exam questions, exam dumps, or protected exam content. Learn why practice questions differ from exam dumps →
Same concept, more angles
3 more ways this is tested on PRINCE2F
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium- A.Continue and report in the next Highlight Report
- ✓ B.Raise an Exception Report to the Project Board
- C.Close the project
- D.Increase the cost tolerance and continue
Why B: When tolerance is forecast to be exceeded, the Project Manager must raise an Exception Report to the Project Board.
Variation 2. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium- ✓ A.Raise an Exception Report to the Project Board and await directions
- B.Increase the stage budget by using the project's change budget
- C.Continue with the current plan and report the overrun in the next Highlight Report
- D.Close the project as the Business Case is no longer viable
Why A: According to PRINCE2's management by exception principle, if a stage tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report. The PM cannot exceed tolerance without authorization.
Variation 3. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium- A.Close the project immediately as the Business Case is no longer viable
- B.Increase the project budget to absorb the additional cost and continue with the current Stage Plan
- ✓ C.Raise an Exception Report to the Project Board and await their direction before proceeding
- D.Continue with the current Stage Plan and report the cost overrun in the next Highlight Report
Why C: In PRINCE2, when a project manager forecasts that stage costs will exceed the stage tolerance, they must escalate the issue to the Project Board by raising an Exception Report. This is because the Project Manager does not have the authority to exceed tolerance levels; the Project Board must decide on corrective actions, such as approving a revised plan or closing the project. Option C correctly follows the PRINCE2 management by exception principle.
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Last reviewed: Jul 4, 2026
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