Gross profit is calculated as sales minus the cost of goods sold. For Widget Inc.: $200,000 - $80,000 = $120,000. The feedback from the document states:
" Sales are reduced by the expenses that were incurred in order to generate the goods sold (cost of goods sold). These expenses include the cost of inventories used to produce the goods as well as the labour that went into their production. The sales revenue, net of the cost of producing those goods, is known as gross profit. In this case, gross profit = $200,000 - $80,000 = $120,000. "
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