NOTE 3. WARRANTY

The warranty accrual is based on historical costs of warranty repairs and expected future identifiable warranty expenses, and is included in accrued expenses in the accompanying consolidated balance sheets. As of December 31, 2011 and June 30, 2011 the warranty reserve amounted to $729,000 and $732,000, respectively. Warranty expenses are included in cost of sales in the accompanying consolidated statements of income. Changes in estimates to previously established warranty accruals result from current period updates to assumptions regarding repair costs and warranty return rates, and are included in current period warranty expense. Total warranty expense for the three months ended December 31, 2011 and 2010 was $276,000 and $78,000, respectively, and for the six months ended December 31, 2011 and 2010 was $510,000 and $182,000, respectively.

Information regarding the accrual for warranty costs for the three and six months ended December 31, 2011 and 2010 are as follows:


	Three months Ended December 31,
	2011			2010
Balances, beginning of period	$	713,000		$	682,000
Accruals during the period		143,000			133,000
Changes in estimates of prior period accruals		133,000			(55,000	)
Warranty expenditures		(260,000	)		(152,000	)

Balances, end of period	$	729,000		$	608,000


	Six months Ended December 31,
	2011			2010
Balances, beginning of period	$	732,000		$	686,000
Accruals during the period		290,000			295,000
Changes in estimates of prior period accruals		220,000			(113,000	)
Warranty expenditures		(513,000	)		(260,000	)

Balances, end of period	$	729,000		$	608,000

The changes in estimates recorded during the three and six months ended December 31, 2011 and 2010 were due primarily to fluctuations in per-unit warranty repair costs and the effects of those fluctuations on our estimates of future warranty repair costs.