Expenses from Gross and Profit Margins

Steps:

• Gross profit = 25% of revenue = 0.25 × $20,000 =$5,000
• Net profit = 10% of revenue = 0.10 × $20,000 =$2,000
• Total expenses = gross profit - net profit (no other income) = $5,000 -$2,000 = $3,000

Why C is correct:

• Expenses = gross profit - net profit, per income statement formula where profit margin reflects net income after all expenses.

Why the others are wrong:

• A: Equals net profit, not expenses
• B: Incorrect subtraction, possibly half of gross profit
• D: Equals gross profit, ignoring operating expenses

Final answer: C