A business generates $500,000 in sales revenue, but after deducting total expenses, it reports a final profit of $80,000. What are total expenses?

Rationale

Listed expenses amount to $420,000.

To find the listed expenses, we subtract the final profit from the sales revenue. In this case, $500,000 in sales revenue minus $80,000 in profit results in $420,000 in total expenses.

A ($80,000) YOUR ANSWER

This choice represents the profit rather than the expenses. Profit is calculated as total revenue minus total expenses, so it cannot be the expense amount itself.

B ($420,000) CORRECT

This option correctly reflects the total expenses calculated by subtracting the profit from the sales revenue. It accurately represents the costs incurred by the business before arriving at the profit figure.

C ($500,000) YOUR ANSWER

This figure exceeds the total sales revenue and is therefore not a feasible expense amount. If expenses were $600,000, the business would report a loss, not a profit of $80,000.

D ($580,000) YOUR ANSWER

Similar to option C, this amount is also greater than the total sales revenue, making it impossible for the business to maintain a profit. Total expenses cannot exceed total revenue in a profitable scenario.

Conclusion

In this scenario, the calculation of expenses is straightforward: subtract the profit from the sales revenue. The accurate total of $420,000 in expenses indicates the amount spent by the business to generate its sales revenue. Understanding this calculation is crucial for analyzing financial performance and ensuring accurate reporting in business operations.

A business generates $500,000 in sales revenue, but after deducting total expenses, it reports a final profit of $80,000. What are total expenses?

Listed expenses amount to $420,000.

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