Lulwah Mohammed Alrubayan^1,2, and Zubir Azhar^1♣

¹School Of Management, Universiti Sains Malaysia, Penang, Malaysia
²College Of Business Administration, University of Hail, Saudi Arabia

 
ABSTRACT

This paper explores the role of the target costing (TC) method in rationalizing the housing unit pricing decision in a real estate development company in Saudi Arabia. Specifically, this study aims to understand how target costing rationalizes the company’s pricing decision following the pursuance of an off-plan sales option. Drawing on the institutional logic perspective, this qualitative case study examines the role of, and response towards, the TC method in the housing unit pricing decision-making process in the real estate company. Apart from observations and documentary reviews, the data sources for this study were collected through 25 semi-structured interviews with 16 key informants. The study provides deeper insights into how TC has been adopted in a real estate development company by illustrating the changes brought about by the off-plan sales option. It suggests the existence of multiple logics, namely cost-driven and market-driven logics, which influence organizational actors’ actions in adopting TC. This paper contributes to the accounting literature by explaining how a company rationalizes the housing unit pricing decision through the TC method to remain competitive. It also guides policymakers to adjust tax incentives and regulatory measures for greater cost transparency that promotes housing affordability and market sustainability.

Keywords: Target costing, Off-plan sales, Real estate development, Saudi Arabia