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 January 2, 2016 and December 27, 2014, the Company has provided a liability of $1,460,000 and $1,245,000, 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
	January 2, 2016			December 27, 2014
Balance at beginning of period	$	1,245,000		$	1,185,000
Warranty charges		1,478,920			1,715,182
Warranty payments		(1,263,920	)		(1,655,182	)

Balance at end of period	$	1,460,000		$	1,245,000