Florida General Contractor Practice Exam

If the curve of actual profits begins to trend upward too early on a job schedule, what does this indicate?

1. The project is over budget

2. Cost overruns may occur

3. The job is likely running ahead of schedule

4. Profit margins are declining

The correct answer is: Cost overruns may occur

When the actual profits curve trends upward too early on a job schedule, it suggests that the project could be heading for potential cost overruns. This scenario typically indicates that expenses might not have been tracked rigorously or that initial costs were lower than anticipated, leading to an optimistic profit projection. As the project progresses, unexpected expenses may arise, pushing costs higher than originally planned. Therefore, while profits initially appear strong, there remains the risk that these profits are not sustainable, ultimately leading to financial issues later in the project. Monitoring cost performance alongside profit trends is crucial for maintaining project control, thus establishing that this upward trend may be a warning signal for future cost management challenges.