Certified Professional Public Buyer (CPPB) Practice Test

How are increases in material and labor costs treated in project budgeting?

1. They are generally disallowed

2. They may be allowed if incurred

3. They are always deducted from total costs

4. They must be paid for upfront

The correct answer is: They may be allowed if incurred

In project budgeting, increases in material and labor costs may be allowed if they are incurred. Budgeting must account for various factors, including the volatility of material prices and changes in labor rates due to market conditions or project scope alterations. When unexpected costs arise during the execution of a project, it is often necessary to adjust the budget to accommodate these expenses rather than strictly prohibiting them. Allowing incurred costs ensures that the project can adapt to real circumstances, thereby maintaining its feasibility and ensuring that the necessary resources are secured to complete the project effectively. By recognizing these costs, project managers can implement necessary changes to secure funding or reassess project timelines and deliverables. This approach supports flexibility in project management, fostering a more realistic and adaptive budgeting process. Other options might imply rigid rules that do not consider the dynamic nature of project management and the real-world fluctuations in costs, which can hinder effective resource allocation and project success.