Note 2

Inventories

New home inventory is carried at the lower of cost or market value. The cost of finished home inventories is determined on the specific identification method and is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized. In addition, an allocation of depreciation and amortization is included in cost of goods sold. Under the specific identification method, if finished home inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or market value.

Pre-owned inventory is valued at the lower of the Company’s cost to acquire the inventory plus refurbishment costs incurred to date to bring the inventory to a more saleable state. This amount is reduced by a valuation reserve which management believes results in inventory being valued at market.

Other inventory costs are determined on a first-in, first-out basis.

A breakdown of the elements of inventory is as follows:


	April 30, 2016			October 31, 2015
Raw materials	$	719,080		$	721,751
Work-in-process		116,463			113,891
Finished homes		5,912,154			5,114,568
Model home furniture and others		91,588			69,495

Inventories, net	$	6,839,285		$	6,019,705


Pre-owned homes	$	5,109,921		$	5,516,272
Inventory impairment reserve		(1,229,613	)		(1,425,108	)

		3,880,308			4,091,164
Less homes expected to sell in 12 months		(1,146,105	)		(1,366,974	)

Pre-owned homes, long-term	$	2,734,203		$	2,724,190