Lasertech is a start-up company that was founded by three college friends Mark, Mike, and Stella, right after they graduated from medical school. They had a vision of utilizing laser technology and selling it to hospitals and physicians to enable less-invasive surgeries. The company has been struggling in recent years. Sales have fluctuated and the company is often left with unsold inventory of products. Mark prepares monthly production schedules based on sales of the previous two months. The production schedule triggers the purchase of inventory. Stella monitors sales and inventory levels and plans promotions to sell slow-moving inventory. Mike monitors the cash flow and borrows against a line of credit when cash is low. The company founders brought in a consultant to assist the company in increasing sales, lowering costs, and controlling inventory. The consultant recommended implementing a formal budgeting process as the first step in improving performance.

Required:

1. Describe the role budgeting plays in strategic planning.
2. Describe the role budgeting plays in defining short-term objectives.
3. Identify and explain four characteristics of a successful budgeting process.
4. Explain how the budgeting process might be able to facilitate communication among the manufacturing, marketing, and finance units of the company.
5. Define flexible budgeting and explain how it is used.
6. Identify two types of budgeting that companies use other than flexible budgeting.