Allocation of Fixed Costs: Texas Roadhouse Restaurant, Research Paper Example

Texas Roadhouse Restaurant is a growing restaurant chain started in 1993. Its mission is to provide affordable foods in hometowns for the large segment of customers coupled with friendly service. The Texas Roadhouse Restaurant is managed under the Texas Roadhouse Restaurants Management Corporation to run the company and its subsidiaries. It has 326 operating restaurants in 46 states operating as either company restaurants, franchise restaurants or license restaurants. In the long term operating strategy, the restaurant management has worked towards developing other restaurants in international and local markets as per the demand levels of moderate priced foods. This is meant to grow the net earnings and shares with an expansion to franchise restaurants with prior market knowledge.

The Restaurant has major costs allocated for every financial year in every restaurant chain or division that are seen as common costs incurred by the restaurant.  The fixed costs allocation includes franchise and royalty fees which amount to $ 30,000 and renewal fee of $10,000, the royalties consists of 2% of the gross sales as defined by the franchise agreement. The other allocation is the cost of sales for food and beverage costs, labor costs for restaurant employees including, direct and indirect costs, the compensation expense on share and excluding the profit sharing incentive.

Other fixed costs include rental costs such as property leases for percentage, straight line and base rent expense. The other operating costs include supplies, utilities, repair and maintenance, advertising, property taxes, general liability insurance and credit card fees, allocations for profit sharing for market partners and managing partners. Prior opening expenses include costs incurred in opening of new restaurants which consists of initial expenses and supplies. Depreciation costs to properties and assets. Closer costs include the losses or gains that come with closing and sale of a restaurant. Administrative costs for corporate functions and future growth of the company.  Further costs are interest and tax costs for borrowings and acquisitions. The unallocated costs include upgrading costs, goodwill and social costs.

The allocated costs increase on a yearly basis, with higher federal tax charges at 32.4%. This however has not deterred the restaurant chain growth with the opening of a new restaurant in 2009. The implications following the opening included larger revenues on sales and developing a more coordinated management by upgrading the database for accounting and office operations by 2009.This is meant to muster losses and leaks within the corporation. A financial report on the allocated costs has been revised to include the unallocated costs.

Annual Income Statement