A disadvantage of contingency funds is:
A)a recognition that the future contains both knowns and unknowns and the problems that might arise will impact the budget.
B)it is difficult to ascertain across what project activities contingency funds should be applied.
C)that application to the contingency fund gives an early warning signal of a potential overdrawn budget.
D)that provision is made in the company plans for an increase in project cost.

Question

Quizplus · Accepted Answer

Although contingency funds are meant to cover the unexpected costs and risks that may arise during a project, it can be difficult to determine which specific project activities they should be applied to. This uncertainty can lead to confusion and inefficiencies in budget management. The other options listed are actually advantages of contingency funds - recognizing that the future is uncertain and planning for potential budgetary issues, providing an early warning signal for budget overruns, and making provisions for potential cost increases.

A Disadvantage of Contingency Funds Is