PMP People — Leading Projects Practice Question
Your project is running 15% over budget at the midpoint. The cost variance is due to higher-than-expected material costs. What should you 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
✓
Perform a variance analysis, update the cost forecast, and consider corrective actions such as finding cost savings
When a cost variance occurs, the project manager should first perform variance analysis to understand the root cause, update the cost forecast based on current performance, and then consider corrective actions such as finding cost savings. Option B is incorrect because reducing scope without analyzing the impact may compromise project objectives and should only be considered after analysis and with change control. Option C is incorrect because ignoring the variance could lead to further overruns and jeopardize project success. Option D is incorrect because requesting additional funding without understanding the root cause and exploring other options is not justified and may not be approved.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Perform a variance analysis, update the cost forecast, and consider corrective actions such as finding cost savings
Why this is correct
A 15% budget overrun at the midpoint necessitates a thorough variance analysis to identify the root causes of the deviation from the cost baseline. Following this, the project manager must update the cost forecast (e.g., Estimate at Completion - EAC) to reflect the new reality and provide an accurate projection of the final project cost. Only after this analysis should corrective actions, such as identifying cost savings or process improvements, be considered and implemented to bring the project back within acceptable limits or to manage stakeholder expectations effectively. This systematic approach is a core component of the Control Costs process.
- ✗
Reduce the project scope to bring costs back in line
Why it's wrong here
Unilaterally reducing the project scope to address a cost overrun is an inappropriate first response. Scope changes have significant implications for project deliverables, stakeholder expectations, and the overall business case, requiring a formal change request. Such a decision must undergo a thorough impact analysis, be documented, and approved through the integrated change control process, rather than being an immediate, unanalyzed corrective action for a budget issue. This approach bypasses critical governance and could jeopardize project success.
- ✗
Continue as planned since the project is only 15% over budget
Why it's wrong here
Ignoring a 15% budget overrun at the project's midpoint is a critical failure in cost control and risk management. This significant variance indicates a potential systemic issue or an inaccurate initial estimate that requires immediate attention and investigation. Failing to address such a deviation proactively will almost certainly lead to further budget depletion, potential project failure, and a loss of stakeholder confidence, contradicting the principles of effective project monitoring and control.
- ✗
Request additional funding from the sponsor immediately
Why it's wrong here
Immediately requesting additional funding from the sponsor without first conducting a comprehensive variance analysis and exploring internal mitigation strategies is unprofessional and demonstrates a lack of due diligence. The project manager's responsibility is to understand the root cause of the overrun, assess its impact, and develop a justified plan, which may include corrective actions or a revised forecast, before escalating to the sponsor for financial assistance. A well-prepared case is essential for securing additional resources.
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