DECA Sports and Entertainment Marketing Practice Exam

What would not be considered part of gross profit?

1. Sales revenue

2. Costs of goods sold

3. Expenses related to marketing

4. Net income

The correct answer is: Expenses related to marketing

Gross profit is calculated as sales revenue minus the costs of goods sold (COGS). It represents the profit a company makes after deducting the costs associated with producing its goods but before accounting for other expenses such as operating expenses, administrative costs, and marketing costs. Marketing expenses are considered operational or period costs that occur after gross profit has been calculated. They do not directly relate to the manufacturing or purchasing of the products that generate the revenue, hence they are not included in the gross profit calculation. Sales revenue is essential for determining gross profit as it's the total income generated from sales. Costs of goods sold are directly subtracted from sales revenue to derive the gross profit figure. Net income reflects the profitability of a company after all expenses (including marketing) have been deducted from the total revenue, which is a separate measure from gross profit.