Final answer:
The presence of fixed costs in cost of goods sold is suggested by a significantly smaller percentage increase in cost of goods sold compared to sales, indicating a cost structure where fixed costs are a major component.
Step-by-step explanation:
When projecting operating expenses, particularly for cost of goods sold, recognizing the mix of fixed and variable costs is crucial. The correct clue indicating the presence of fixed costs is c. that the percentage increase in cost of goods sold in prior years is significantly less than the percentage increase in sales. This pattern suggests that as sales increase, the cost of goods sold does not rise at the same rate, which is characteristic of a cost structure with a significant fixed cost component.
Fixed costs, such as rent for factory space or equipment leases, remain constant irrespective of the level of production. Conversely, variable costs change with production levels, such as materials and direct labor. When sales rise sharply while the cost of goods sold only increases marginally, it implies that fixed costs constitute a large portion of the total costs, thereby diluting the impact of increased production on overall costs.