- A
Increase the stage budget and continue with the current plan
Why wrong: The Project Manager cannot unilaterally increase tolerances; that requires Project Board approval.
- B
Continue with the plan and report the overrun in the next Highlight Report
Why wrong: Escalation must be immediate via an Exception Report, not delayed until the next Highlight Report.
- C
Raise an Exception Report to the Project Board and await direction
This follows management by exception: the PM escalates when tolerances are forecast to be breached.
- D
Close the project immediately as the Business Case is no longer viable
Why wrong: A cost tolerance breach does not automatically mean the Business Case is unviable; the Board must assess.
Question 1,645 of 1,731
Management by Exception: Cost Tolerance Breach Escalation
This PRINCE2F practice question tests your understanding of people: organizations, teams, and leadership. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. 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 stage 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 direction
Option C is correct because PRINCE2 dictates that when a project manager forecasts a deviation beyond the stage's cost tolerance, they must raise an Exception Report to the Project Board. The Project Board then decides on corrective action, such as approving a revised plan or closing the project. This ensures governance and control over the project's financial limits.
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.
- ✗
Increase the stage budget and continue with the current plan
Why it's wrong here
The Project Manager cannot unilaterally increase tolerances; that requires Project Board approval.
- ✗
Continue with the plan and report the overrun in the next Highlight Report
Why it's wrong here
Escalation must be immediate via an Exception Report, not delayed until the next Highlight Report.
- ✓
Raise an Exception Report to the Project Board and await direction
Why this is correct
This follows management by exception: the PM escalates when tolerances are forecast to be breached.
Related concept
Read the scenario before looking for a memorised answer.
- ✗
Close the project immediately as the Business Case is no longer viable
Why it's wrong here
A cost tolerance breach does not automatically mean the Business Case is unviable; the Board must assess.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates confuse the Highlight Report (used for routine progress within tolerance) with the Exception Report (mandatory for forecast tolerance breaches), leading them to incorrectly select Option B.
Detailed technical explanation
How to think about this question
In PRINCE2, cost tolerance is a delegated authority from the Project Board to the Project Manager for a specific stage. When a forecast breach occurs, the Project Manager must immediately escalate via an Exception Report, which includes options for corrective action. The Project Board then reviews the Business Case and may approve an exception plan, which resets the stage's tolerance and plan, ensuring the project remains aligned with its justification.
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
Got this wrong? Here's your next step.
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FAQ
Questions learners often ask
What does this PRINCE2F question test?
People: organizations, teams, and leadership — This question tests People: organizations, teams, and leadership — 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 direction — Option C is correct because PRINCE2 dictates that when a project manager forecasts a deviation beyond the stage's cost tolerance, they must raise an Exception Report to the Project Board. The Project Board then decides on corrective action, such as approving a revised plan or closing the project. This ensures governance and control over the project's financial limits.
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
8 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 cost tolerance. What should the Project Manager do?
hard- A.Continue and report the overrun in the next Highlight Report
- B.Increase the budget and continue with the current plan
- C.Close the project as the Business Case is no longer viable
- ✓ D.Raise an Exception Report to the Project Board
Why D: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report. This is the principle of management by exception.
Variation 2. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- A.Close the project immediately
- ✓ B.Raise an Exception Report to the Project Board
- C.Increase the budget and continue with the current plan
- D.Report the overrun in the next Highlight Report
Why B: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report. This is management by exception.
Variation 3. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- A.Close the project immediately as the Business Case is no longer viable
- B.Continue and report the cost overrun in the next Highlight Report
- ✓ C.Raise an Exception Report to the Project Board and await their direction
- D.Increase the project budget to absorb the additional cost
Why C: In PRINCE2, when a project is forecast to exceed its cost tolerance, the Project Manager must escalate the issue to the Project Board via an Exception Report. This is because the Project Manager does not have authority to exceed tolerances; the Project Board must decide whether to approve a revised Business Case, adjust tolerances, or terminate the project. Option C correctly follows the PRINCE2 principle of management by exception.
Variation 4. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- ✓ A.Raise an Exception Report to the Project Board and await their direction
- B.Increase the project budget and continue with the current plan
- C.Continue with the current plan and report the overrun in the next Highlight Report
- D.Close the project immediately as the Business Case is no longer viable
Why A: In PRINCE2, when a project forecasts exceeding its cost tolerance, the Project Manager must escalate the issue to the Project Board via an Exception Report. This is a formal mechanism to request a decision on corrective action, as the Project Manager does not have authority to change tolerances or budgets. The Project Board then evaluates the situation and provides direction, ensuring governance and control over the project's viability.
Variation 5. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium- A.Increase the stage budget using contingency reserves
- ✓ B.Raise an Exception Report to the Project Board
- C.Close the project as the Business Case is no longer viable
- D.Continue with the current plan and report the overrun in the next Highlight Report
Why B: According to PRINCE2's management by exception, if a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report.
Variation 6. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium- A.Increase the project budget to absorb the additional cost
- B.Continue and report in the next Highlight Report
- ✓ C.Raise an Exception Report to the Project Board
- D.Close the project immediately
Why C: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report, following management by exception.
Variation 7. 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
- B.Increase the budget and continue
- C.Close the project immediately
- D.Continue and report in the next Highlight Report
Why A: Escalation via Exception Report is required when a tolerance is forecast to be exceeded.
Variation 8. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium- A.Report the overrun in the next Highlight Report
- ✓ B.Raise an Exception Report to the Project Board
- C.Close the project as the Business Case is no longer viable
- D.Increase the stage budget and continue
Why B: In PRINCE2, when a project manager forecasts that a stage will exceed its cost tolerance, they must escalate the issue to the Project Board by raising an Exception Report. This is because tolerances are delegated limits, and exceeding them requires board-level decision-making, not just reporting or self-authorization. The Exception Report triggers an Exception Plan to recover or adjust the project.
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Last reviewed: Jun 24, 2026
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