In terms of costs, Laura found out that to make 1 ounce of Old Bay, it costs 39 cents in Q3, and 50 cents in Q4. The production cost is higher in Q4 due to seasonal supply shortages. On the other hand, it costs 12 cents to keep an ounce of Old Bay in inventory for a quarter. The inventory-carrying cost is relatively high because Old Bay requires a low humidity storage environment. Since production and sales take place over time in each quarter, Laura believes that she should use each quarter's average inventory = (beginning inventory ending inventory)/2 to calculate the quarter's inventory-carrying cost