This Weighted Average Calculator calculates the average value of a set of observations, weighted by a second factor. This second factor can be a percentage (ideally of the total sample) or a base volume number (such as lbs, tons, or operating hours). The weighted average calculator tallys up the total volume of activity, weighted by the second factor. Thus, observations with a lot of volume / share behind them will count more significantly towards the total than observations with minimal activity. We did a version of this specifically for calculating the Weighted Average Grade of a course from the individual tests, assignments, and projects.
The calculator provides the weighted mean of the scores (based on the weighted average formula).
A simple average of a series takes the sum (sum function in Excel) of observations and divides them by the count of values. It counts each value equally. This is also known as the arithmetic mean.
A weighted average recognizes that some data point values have more importance than others and the mean result should be biased towards those items. For example, while we may have thirty homework assignments or class grade items in a semester, the final grade (letter grade) should be skewed towards the results of the final exam. So if your grade average needs a high desired grade in that class, better do well on the final exam.... (vs. the other assignment grades)
Mathematically, you calculate a weighted average with a sumproduct function (also in Excel). Multiply each value by the weight you are giving it. Then divide by the total weight.
As the example demonstrates, weighted average calculations are common in business. A company may buy inventory from different suppliers, in varying quantities, and at different times. To set the expected price of a product, they may use a weighted average cost system. This would give a different weight to each cost based on the corresponding weight purchased.
The same thinking applies in finance with the idea of an average interest rate or weighted average cost of capital. A company may borrow money from different sources with a very different rate on each loan. The weighted average interest rate is where you pool the balances and interest payments to understand your average cost of capital. (effectively, a weighted mean calculator)
Need to pass an answer to a friend? It's easy to link and share the results of this calculator. Hit calculate - then simply cut and paste the url after hitting calculate - it will retain the values you enter so you can share them via email or social media.