Question

1. Prepare a memo for the management of Tesla Motors:
   1. Which considers the limitations in the use of a traditional budgetary control system in their modern workplace

Answer 1

Traditional Budgeting is the process of preparing the budget for current year based on the figures of the previous year i.e. the previous year is considered as the base for preparing the budget for the current year.

In case of Tesla Motors, the limitations of using the traditional budgetory control system are as below:

1. The Traditional Budgeting system is time taking: Since, all the base is taken from the previous year, hence, a lot of working needs to be done for previous year in order to predict the numbers for the current year. This consumes a lot of time for budget preparation by Tesla Motors.

2. Less inclined towards innovation: Since, all the base is taken from the previous year, hence, the spending on innovations would be in line with the previous year spendings. Further, being a motor company, a lot of innovation is required to be done to capture the market, which is not possible if traditional budgeting is done.

3. Not in line with the strategies of the organization: Since, the strategies of Tesla Motors would be to improve upon technolofy and design better vehicles, the traditional budgeting system ignores the strategic aspect and continues to project on the basis of previous year. Hence, the traditional budgeting is not effective.

4. No scope of new plans: The compay's new plans for current year cannot be accounted for using the traditional budgeting. There is no scope to incorporate new plans as the figures are based upon previous year. This also leads to inaccurate predictions for current year.

5. Scope of errors: Since, the traditional budgeting is based on a lot of working for previous year, hence, there is scope of making human errors which may lead to inaccurate predictions for current year.

Hence, it is not recommended for Tesla Motors to adopt traditional budgeting in this modern space and instead use zero based budgeting for making predictions for current year.