Calculate Weighted Average in Excel

Calculate Weighted Average in Excel

A weighted average is a type of average where each value is assigned a weight that determines its contribution to the final result, thereby allowing the average to reflect the relative significance of each value. 

Weighted Average – Example

Suppose you have three software products with prices $50, $70 and $90, and their market shares are 10%, 20% and 70% respectively. The weighted average price would be calculated as follows:

$(50 * 0.1) + (70 * 0.2) + (90 * 0.7) = 5 + 14 + 63 = $82 So the weighted average price of the three software products is $82. There are other types of averages like mean, see below for explanations about them.

Weighted Average Practice Exercise

What other similar measures are there?

1. Arithmetic Average (Mean): Arithmetic average is calculated by adding up all the values and dividing by the number of values. This gives an equal weight to each value and is the most common type of average.

2. Median: The median is the middle value when all values are sorted in numerical order.

3. Mode: The mode is the most frequently occurring value in a set of data.

4. Geometric mean: The geometric mean is the nth root of the product of n values. It is used to average values that have a wide range, as it tends to be lower than the arithmetic mean for such data.

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