Also known as a cost increase, budget overrun, involves unexpected costs incurred in excess of budgeted amounts due to an underestimation of the actual cost during budgeting.

Also known as a cost increase, budget overrun, involves unexpected costs incurred in excess of budgeted amounts due to an underestimation of the actual cost during budgeting.

• A. Cost Underrun
• B. Sinking Fund
• C. Cost Overrun
• D. Depleting Cost

Answer: (C)

The concept here is when actual costs end up higher than what was planned in the budget because the estimated costs were too low. This situation is called a cost overrun, or budget overrun, and it happens when the project encounters expenses beyond the original forecast—often due to underestimating quantities, prices, or encountering unforeseen conditions, scope changes, or design refinements. In construction management, recognizing a cost overrun is important for taking corrective actions like revising forecasts, tightening cost control, and applying contingencies or change-management processes to address the extra spending. The other terms don’t fit: a cost underrun would mean actual costs are less than budgeted; a sinking fund is just a reserve for future obligations, not a current cost increase; depleting cost isn’t a standard term describing budgeting shortfalls.

The concept here is when actual costs end up higher than what was planned in the budget because the estimated costs were too low. This situation is called a cost overrun, or budget overrun, and it happens when the project encounters expenses beyond the original forecast—often due to underestimating quantities, prices, or encountering unforeseen conditions, scope changes, or design refinements.

In construction management, recognizing a cost overrun is important for taking corrective actions like revising forecasts, tightening cost control, and applying contingencies or change-management processes to address the extra spending. The other terms don’t fit: a cost underrun would mean actual costs are less than budgeted; a sinking fund is just a reserve for future obligations, not a current cost increase; depleting cost isn’t a standard term describing budgeting shortfalls.