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September 28, 2021

How to Calculate Weighted Average?

Do you wish to know how to calculate the weighted average? If yes, you must understand that it is in demand and is necessarily preferred around accounting offices, statistical analysis needs, and school classrooms. It helps people take a closer look at a particular set of data than the traditional average calculation. The teachers and other respective officials need to know about calculating the weighted average, as it might be an essential potential testing attribute. 


Therefore, this article is dedicated to the people who wish to learn the proper ways of calculating a weighted average. Follow the steps, and you will master the technique of handling data with it. 


What is Weighted Average and Why Does it Matter?

Before moving onto the methods and steps of calculating the weighted average, you need to know its purpose. A weighted average is defined to be a collective average of a particular set of data. It recognizes some specific numbers that are destined to be more critical than others in that set. Weighted averages are meant for stock portfolios, grading standards, statistical attributes, and many other such jobs. 


It is considered a valuable tool within the accounting aspects that can help people get track of stock fluctuations and also helps in accounting for variable data. Some of the applications of weighted averages are:


  • Calculation of grades
  • Bond Yield average
  • During any cost difference
  • Calculating baseball batting averages. 


These are just a few of the many applications or uses of weighted averages that explain its necessity around diverse industries and sectors. Hence, this explains why learning about calculating the weighted average matters.  


2 Methods How to Calculate Weighted Average


Here are the two methods to quickly calculate the weighted average for a set of data. 


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Method 1: General Method of Calculating Weighted Average When Weights are Adding up to One

A weighted average is different from that of a typical standard, as it ultimately reflects that some data has more weightage than that of the others in the set. Therefore, to calculate that, you need to follow some of the specific steps, which are as follows:


Step 1: Collect the Numbers

In the first step, you need to gather all the numbers that you want to calculate the average of. Assemble the list of numbers for which you seek a weighted average calculation, such as student grades, stock portfolio numbers, and others. 


Step 2: Determining Weight of Every Number

After getting all the numbers, it is essential to determine the probable weight of each of those obtained numbers. It is necessary to calculate as part of the calculation for the final average. 


For instance, if a school has quizzes, tests, and terminal examinations, then each section's weightage is essential for calculation. Supposedly, the weightage of quizzes is 20%, tests are 35%, and terminal exam is 45%, then the weight adds up to one or 100%. 


You cannot use percentages in your calculation. You will have to convert them into decimals before proceeding with the analysis. And, when you do that, the decimals you obtain will be the 'weighting factors.' 


Step 3: Multiply Every Number with its Obtained Factor

Once you have all the numbers, pair each of them along with their weighting factor, multiply each number set and weights to find the numbers necessary for calculating the average. For instance, if you have scored 85 in your test and it is worth 20% of your total grade, you will have to multiply 85*0.2 (Decimal value of 20%). 


Step 4: Add the Resulting Figures

The final step of this method is to add all of the numbers obtained from the previous process. Let the numbers are 'x,' s, and the multiplying weighing factors be 'w.' The formula for calculating the weighted average x1(w1)+x2(w2)+…= Weighted Average. The multiplication of 'x's and 'w' values is done in the previous step. All you have to do now is bring them together and add up!


Method 2: Calculating Weighted Average when Weights are not Equal to One


The steps for obtaining a weighted average when the weights are not equivalent to one are as follows:

1. Gather all the essential data a first

2. Find the weight of each number.

3. Find the sum of all the weights obtained from the previous step. 

4. Multiply the numbers to their obtained weights, and find the sum of the resulting numbers. 

5. Now, divide the resulting sum by the sum of weights (calculated in step 3) for finding the weighted average. 


Conclusion

Hence, these are the steps that guide you to know how to calculate weighted average. Irrespective of the sector you are working in, you must keep in mind that weighted average is quite valuable for almost all of them. Therefore, learning the technique is quite favorable for all individuals. 


So, if you wish to master the technique, then take different scenarios and implement the above steps to practice and perfect yourself in it.

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