Final answer:
The primary difference between midstream costs incurred at a manufacturing firm versus a service firm is how those costs are allocated.
Step-by-step explanation:
The primary difference between midstream costs incurred at a manufacturing firm versus a service firm is how those costs are allocated. In a manufacturing firm, midstream costs are primarily focused on the production process, such as materials, labor, and equipment.
These costs are incurred in order to transform raw materials into finished products. For example, in the case of producing cars, midstream costs would include the cost of metal, paint, and assembly line labor. In contrast, a service firm does not have the same type of physical production process.
Their midstream costs are more related to the delivery of services, such as employee wages, office rent, and overhead expenses. For instance, in the case of a hair salon, midstream costs would include the cost of hairdresser salaries, salon supplies, and utilities.