A goal of the budgeting process is to communicate a consistent set of plans throughout the company. Favorable variances are added to unfavorable variances to create a total favorable variance. Preparation of the production budget is the first step in the preparation of operating budget. A flexible budget is prepared to represent only one level of sales volume. A master budget is the financial plan for a specific segment of an organization. A favorable variance reflects a decrease in operating income. A variance is the difference between an actual amount and an allocated amount. The sales volume variance is a result of the difference between the actual selling price and the budgeted selling price. A static budget is prepared to represent different levels of sales volume. Standard costs help motivate employees by serving as benchmarks against which their performance is measured. Asset turnover ratio measures how efficiently a business uses its average total assets to generate sa