Gross profit is calculated using the net sales, and not the gross sales numbers. Meanwhile, the net sales calculation includes the deduction of these amounts. Direct costs are the amount of money directly related to the manufacturing process of products, like raw materials and labor wages. To report your company’s net sales on the income statement, you should include it in the direct costs portion of the statement. Net sales is the sum of a company’s gross sales minus its returns, allowances, and discounts. Net sales calculations are not always…