A small hardware store purchases 5 hammers for $5 each and sells the hammers for $9 each. Which of the following amounts represents the total gross profit?
Gross profit is calculated as total revenue minus the cost of goods sold (COGS). The store purchases 5 hammers at $5 each, so COGS = 5 × $5 = $25. The hammers are sold at $9 each, so total revenue = 5 × $9 = $45. Gross profit = $45 − $25 = $20. Option A ($4) represents the profit per hammer, not the total. Option C ($25) is the COGS, and Option D ($45) is the total revenue. This question tests basic accounting principles under the Accounting and Finance category.
[Reference:ETS Praxis Business Education: Content Knowledge (5101) Study Companion, Section on Accounting and Finance; Accounting Principles, Chapter 5., ]
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