How is gross profit determined?

Gross profit is calculated as total sales minus the cost of goods sold (COGS). This figure represents the amount of money a business makes from its core activities after deducting the direct costs associated with producing the goods sold. Understanding this concept is fundamental to assessing a company's profitability at the most basic level, as gross profit indicates how efficiently a company is producing and selling its products.

In contrast, the other options describe different financial calculations that do not relate specifically to gross profit. Revenue minus operating expenses pertains to operating profit, which considers all operating costs, not just the direct costs of making goods. Operating income plus non-operating income evaluates total income from both core and supplementary activities, leading to net income rather than gross profit. Lastly, total revenue plus total expenses describes an overall financial relationship but does not yield a measure of profit and does not reflect the core operations of a business. Thus, the accurate method for calculating gross profit is reflected in the choice of total sales minus cost of goods sold.