Where is this problem from? The approximation is a bit too wide for the question and a real GMAT question would clearly state the answer was an approximation. however here is how I would solve it:

First is to figure out that if the revenue increases 44% over two years that the yearly increas is 20% (20% of 120% is 144%) Which means that costs increase by 10% each year. we have the profit (R - C) for each of the first two years. I found it helpful to create a chart

R7 1.2R7 1.44R7
C7 1.1C7 1.21C7
-1000 0 ???

Now it is just about doing the algebra:

you know that 1.2R7 = 1.1C7 and that R7 - C7 = -1000

You can rewrite R7 = C7 - 1000 which means that 1.2(C7 - 1000) = 1.1C7 which simplifies to
1.2C7 - 1200 = 1.1C7

.1C7 = 1200
C7 = 12000

which means R7 = 11000.

Now you have to put that into the final column:

1.44(11000) - 1.21 (12000) = ?

15840 - 14520 = 1320

so the closest answer is 1300