There are two groups of costs in accounting. The first group is the direct cost of a product or service. The second group is the overhead or general costs. For instance a clothing retailer has to purchase the clothes he intends to sell. The cost of the clothing sold would be a direct cost. The same retailer has to pay for the store he sells out of and that would be an overhead or general cost. The difference between his total sales and the direct costs is the Gross profit. This is sometimes referred to as the gross margin. The difference between the total sales and direct costs and overhead costs is the Net profit.
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