price of buying or making an item that is sold; also calledcost of goods sold. The difference between sales and cost of sales is gross profit. For a retail business, the cost of sale is the purchase price of the item. For a manufactured good, the cost of sale includes direct material , direct labor and factory overhead associated with producing it. An example would be the cost to General Motors of making a car. An illustrative example of a gross profit calculation for a retail business follows: