The application of target costing to the real-estate investment industry - a dual model approach

Publisher:
National Cheng Kung University * College of Management
Publication Type:
Journal Article
Citation:
Asia Pacific Management Review, 2013, 18 (2), pp. 221 - 237
Issue Date:
2013-01
Full metadata record
Files in This Item:
Filename Description Size
2013001516OK.pdf114.41 kB
Adobe PDF
This paper applies target costing (TC) to Taiwan's real-estate investment industry by considering the variation of selling prices in a batch of heterogeneous products (apartments). TC has largely been applied and studied in the manufacturing industry, assuming a structure of a single sale-price for homogenous products within the same batch. However, the products in the same construction batch in a real-estate investment project often have different prices caused by product attributes (floor level, orientation, location) and product changes requested by clients. We provide interview evidence from six real-estate investment firms highlighting how batch profit is pursued while focusing on different product prices within the same product batch. Unlike traditional applications of TC, our findings show target-cost levels may increase for higher-priced products, and do not necessarily decrease for lower-priced products. This is due to the economies of scale arising from purchasing components and maintaining customer satisfaction. The findings also reveal the importance of considering processes/procedures for dual models by emphasizing the increased product price and land investment at the preliminary planning stages, to achieve a more practical TC in the real estate investment industry.
Please use this identifier to cite or link to this item: