Your equations are correct (although as I said in my other comment 9.81 is the global average but gravity varies by ~0.1 so that’s too many significant figures), but their issue doesn’t have to do with using sloped distance (they don’t as far as I can tell). It says the height change is 2 meters, and they use 2 meters as the distance since that’s the component of the displacement parallel to gravity. The problem is that they didn’t convert mass to weight.

work = force • displacement = |force| * |displacement| * cos(angle between them)
    = component of force parallel to displacement * |displacement|
    = component of displacement parallel to force * |force|

weight = force due to gravity = mass * acceleration due to gravity ≈ 5 kg * 9.8 m/s² = 49 N