Ever wonder why we require a weighted average? We can’t compute everything in a day. For example, if I ask how the weather has been for a week, you won’t give me the temperature every day. Instead, you will estimate it, which brings us to the idea of average. The average is equal to the sum of the values divided by the number of values, and each value has the same weight in mathematics.
Let’s look at another scenario now. You are a university student, and you received your semester exam results. How are you going to determine your average now that you have a minor and major for the semester, each of which has a 25% weighting and a major for a 75% weighting? So now we have the idea of weightage average, where we weigh each value.
How does one calculate a weighted average?
An instrument to compute averages weighted by various values is the weighted average formula. Each data point has a different value, and the weighted average assigns a weight, or importance, depending on those values. After that, the final average is determined using this weighted average.
Excel formula for calculating the weighted average
The weighted average may be computed in Microsoft Excel with the same methodology and much less labor because the majority of the calculation is handled by Excel functions.
How Can I Use Excel to Calculate Weighted Averages?
There are two ways we can compute weighted averages in Excel:
By manually choosing the reference Excel column containing the numbers and multiplying it by the weighted percentage provided to it,
by utilizing Excel’s Weighted Average function. Allow us to demonstrate how to calculate the weighted average in Excel without the need for a formula using a simple example.
The information in the table is:
- Values are in Column A.
- This is Column B: Weight.
The following are the steps to calculate a weighted average in Excel:
Step 1: Choose cell B6 and type B2+B3+B4+B5 into the formula. The result is “10,” or the total weight.
Step 2: Choose cell B7 and type =(A2B2+A3B3+A4B4+A5B5)/B6 into it.
1: Weighted Average SUM Formula
The Excel SUM function adds up the numbers within a range of cells and returns the total.
The SUM Formula for Weighted Average has the following syntax: =SUM(number1,[number2],..)
The SUM Formula for Weighted Average presents the following arguments:
Number 1: We’ll start by adding the first number. It is a necessary defense.
Number 2: We’re going to add the second number. This parameter is optional.
2: SUMPRODUCT Weighted Average Formula
After multiplying the items within an array range, the SUMPRODUCT function returns the total of those products.
The Weighted Average SUMPRODUCT formula has the following syntax: =SUMPRODUCT(array1, [array2], [array3],…
The following are the arguments for the weighted average sum product formula:
- Array1: We will multiply the values in the first array or numeric range and then add them. It is a necessary defense.
- Array2: We will multiply the values in the second array, or numeric range, and then add them. It is a necessary defense.
- Array3: We will multiply the values in the third array,or numeric range, and then add them. This parameter is optional.
Crucial Points To Remember
Using the SUMPRODUCT and SUM functions in Excel, or by choosing the cell references containing the values and multiplying them by the designated weighted percentage, we may compute the weighted average.
Stock investors monitor share costs using the weighted average.
If the array arguments in the SUMPRODUCT function are not of the same size, Excel’s Weighted Average function will return a “#VALUE!” error.
FAQs of How to Calculate Weighted Averages in Excel:
What does the Excel term “weighted average” mean?
In Excel, the term “weighted average” refers to assigning the appropriate weights to each of the available values to compute the average.
Which Excel formula is used to calculate the weighted average?
The weighted average formula is: Equals SUMPRODUCT(array1, [array2], [array3],… / SUM([number2], [number1],)
How is the weighted average determined?
The following are some methods for computing weighted averages in Excel:
1) Using the designated weighted percentage, we can multiply the cell reference containing the values.
2) We can utilize the SUMPRODUCT and SUM functions in the weighted average calculation. We multiply every range of numbers with accessible weights by themselves using the SUMPRODUCT formula, calculate their sum, and then divide that result by the actual sum of the available weights.
3) The average function can be utilized to multiply the values by their weight.