When projecting operating expenses,it is important to determine the mix of fixed and variable costs; one clue suggesting the presence of fixed costs is:
A) the percentage change in cost of goods sold in prior years is significantly greater than the percentage change in sales.
B) the percentage change in cost of goods sold in prior years is significantly less than the percentage change in sales.
C) low capital intensity in the production process.
D) the percentage change in sales in prior years is significantly greater than the percentage change in receivables.

Question

Quizplus · Accepted Answer

A significantly smaller percentage change in cost of goods sold compared to sales suggests the presence of fixed costs, as variable costs would typically follow in proportion to sales changes.

When Projecting Operating Expenses,it Is Important to Determine the Mix