Gross Profit is defined as the difference between total sales of
a company and its cost of goods sold. In computing gross profit
only the direct costs that is the cost which can be assigned to a
specific product are deducted from the sales. Indirect cost are not
deducted while computed gross profit.
Depreciation and Selling and administrative expenses cannot be
directly apportioned to a specific product and cannot be tied
directly to production, hence are not included in cost of goods
sold and therefore not deducted in calculating gross profit of a
company.
Option b) is correct.
Gross Profit = Sales – Cost of Goods Sold.