Note 6

Warranty Costs

The Company provides for a limited warranty as the manufactured homes are sold. Amounts related to these warranties are as follows:


	Three Months Ended
	January 30, 2016			January 31, 2015
Beginning accrued warranty expense	$	100,000		$	75,000
Less: reduction for payments		(143,468	)		(40,888	)
Plus: additions to accrual		143,468			40,888

Ending accrued warranty expense	$	100,000		$	75,000

The Company’s limited warranty covers substantial defects in material or workmanship in specified components of the home including structural elements, plumbing systems, electrical systems, and heating and cooling systems which are supplied by the Company that may occur under normal use and service during a period of twelve (12) months from the date of delivery to the original homeowner, and applies to the original homeowner or any subsequent homeowner to whom this product is transferred during the duration of this twelve (12) month period.

The Company tracks the warranty claims per home. Based on the history of the warranty claims, the Company has determined that a majority of warranty claims usually occur within the first three months after the home is sold. The Company determines its warranty accrual using the last three months of home sales.