1) On page 12, the 10-K states that the home building industry remains in an extended period of slowdown and that they weren’t sure how long the slowdown will stay for. The decline in the job market, confidence in purchasing homes, increased in unemployment, increased in foreclosures, inability to sell homes and overall decline in economy were factors that were threaten the company. The fact that there were many cancelled existing agreements and being in a highly competitive market were some major threats that worried stockholders. The 10-K also states that because their company has a completive advantage over other companies because they “compete primarily on the basis of price, location, design, quality, service and reputation and because of their financial stability, relative to most others in our industry, has become an increasingly favorable competitive factor as more home buyers focus on builder solvency.” Their success comes from product leadership customer value proposition. The annual report mentions in numerous places that Toll Brothers focuses on Luxury Homes and Communities and high quality construction. Other control factors the company can do in order to reduce the risk for example, increasing their incentives for consumers to purchase a home or decrease or take a cut in profit of the homes.

2) The Toll Brothers Company would likely use job order costing because many different services are produced each period. Each home built and sold is different from the previous home. The amount and