What is the calculation used to determine gross profit?

The calculation to determine gross profit is revenues minus cost of sales. Gross profit is a key indicator of a company's profitability, as it reflects the amount of money left over from sales after deducting the direct costs associated with producing the goods or services sold, which are referred to as the cost of sales or cost of goods sold (COGS).

This figure is essential for understanding how efficiently a company is producing its goods and managing its production costs. It does not take into account operating expenses, taxes, or other financial metrics, which are considered further down the income statement. Therefore, option B correctly identifies the proper relationship and serves as the foundational figure for calculating further profitability metrics like operating income and net income.