NOTE 7 - PRODUCT WARRANTIES

The Company provides the retail home buyer a one-year limited warranty covering defects in material or workmanship in home structure, plumbing and electrical systems. The Company’s estimated warranty costs are accrued at the time of the sale to the dealer following industry standards and historical warranty cost incurred. Periodic adjustments to the estimated warranty accrual are made as events occur which indicate changes are necessary. As of December 28, 2013 and December 28, 2012, the Company has provided a liability of $1,185,000 and $1,170,000, respectively for estimated warranty costs relating to homes sold, based upon management’s assessment of historical experience factors and current industry trends.

Management reviews its warranty requirements at the close of each reporting period and adjusts the reserves accordingly. The following tabular presentation reflects activity in warranty reserves during the periods presented:


	For the years ended
	December 31, 2013			December 31, 2012
Balance at beginning of period	$	1,170,000		$	1,330,000
Warranty charges		1,538,363			1,193,893
Warranty payments		(1,523,363	)		(1,353,893	)

Balance at end of period	$	1,185,000		$	1,170,000