Macchiato Vs Starbucks

The red group has chosen to use the variable cost which is the amount used or produced in which the total sum changes based on the material cost, labor cost, and overhead price. Starbucks has increased their prices for almost two dollars to capture the consumer surplus by upgrading from small to large coffee to guide customer toward the most profitable product (Dawson, 2013). A large caramel macchiato consists of caramel sauce, espresso, ice, milk and syrup costs $4.97. For instance, if the expense of a 16-ounce cup of a caramel macchiato will be broken down for a better understanding. The coffee beans are $0.60; milk is $0.08, caramel sauce is $0.05, ice is $0.03, the syrup is $0.02, a cup is $0.12, a lid is $0.03, and the labor cost is $0.35. The direct materials for a 16-ounce caramel macchiato equal $2.64 by adding the labor it equals $2.99. The group decided to use a markup by 12% making at $3.58; saving the customer $1.39. In opposing, Starbucks doubles the number of profits in which other coffee shops make only .70 to .90 per coffee. In conclusion, Starbucks knows that if the demand is high, people will continue to pay more for the experience and their coffees.
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