For example, a company owner purchases 40,000 units of a product at $5 each and 20,000 at $7 each. We will use these units as the weight and the total number of units as the sum of all weights to calculate the weighted average. So, we will get,

=$5(40,000) +$7(20,000)/40,000+20,000

= ($200,000+$140,000)/60,000

= $160,000/60,000

=$5.66

So, the average weighted cost is $5.66 per unit.

With the same example, if we can calculate an average. It can be calculated by adding them and dividing them by several observations.

Difference Between Average vs Weighted Average

The average and weighted average are mathematical and statistical terms in finance and business. But both are calculated differently. The average is the sum of all individual observations divided by the number of observations. Average is used to find the middle value in a particular data set. It is also known as a central tendency. It is used to find the central tendencyCentral TendencyCentral Tendency is a statistical measure that displays the centre point of the entire Data Distribution & you can find it using 3 different measures, i.e., Mean, Median, & Mode.read more of a group of data in a specific group of data. The weighted average is used in the field of accounting. The primary purpose is to find the right weight or value to solve. For example, the weighted average is the value of the principal repayment of certain bonds or loans until the principal value is paid.

What is Average?

The average is the sum of all individual observations divided by the number of observations. It is used to find the middle value in a particular data set. It is also known as a central tendency. It is used to find the central tendency of a group of data in a specific data group. It is mainly used for the representation of data. We can solve it for a data set by using the arithmetic formula.

Average formula = Sum of Observation / Number of Observation

Example of Average

Let us see an example to understand the average.

Suppose ten students in class score 50, 60, 70, 80, 65, 78, 95, 63, 58, 91, respectively, out of 100. Now, let us find the average for the above marks of a student.

Average formula  = Sum of Observation / Number of Observation

Sum of Observation = 50 + 60 + 70 + 80 + 65 + 78 + 95 + 63 + 58 + 91

So, the average for a class of 10 students is 71.

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What is the Weighted Average?

The weighted average is used in the field of accounting. The main purpose is to find the right weight or value to solve. The weighted average is the value of the principal repayment of certain bonds or loans until the principal value is paid. The weighted average is also a type of average with a small difference. All observations do not carry equal weights; different observations carry different importance. Each observation is multiplied by the weight and added up. Weight average is used to perform. It can be taken as an average in which every value has a different weight. And it is influenced by the weight of the data value. The weighted value is the sum of the product of observation into weight divided by the sum of weight and can be written as: –

Weighted Average  Formula  = (a1w1 + a2w2 + a3w3 + …+ anwn) / (w1 + w2 + w3 … +wn)

Example of Weighted Average

Let us see an example to understand it better.

Suppose three different exams contribute to giving final marks for a year. There is a different weight for each exam. For example, the weight was 15% for the first exam, and for the second exam, the weight was 25%. And for the final exam, the weight was 60%. Now, let us assume a student scored 60 marks in the first, 70 in the second, and 80 in the final exam out of 100. Let us calculate the final marks of a student.

Use the formula mentioned above for its calculation.

  • So, the weighted average of a student is 74.5.

Average vs Weighted Average Infographics

Here, we provide you with the top 5 differences.

Average vs Weighted Average – Key Differences

The key differences between this average and the weighted average are as follows: –

  • The average is the sum of all individual observations divided by the number of observations. In contrast, the weighted average is observation multiplied by the weight and added to find a solution.An average is a mathematical equation, whereas the weighted average is applied in the daily activities of finance.The average represents a set of data. At the same time, the weighted average needs to be evaluated to solve a problem.One can solve the average for the data set by using the arithmetic formula. The weighted average component is given the weight of the value to arrive at a specific answer.

Average vs. Weighted Average Head-to-Head Differences

Let us now look at the head-to-head differences.

Conclusion

So, we have seen the average and weighted average and the difference between the two. We have seen that the average is the sum of all individual observations divided by the number of observations. We can solve the average for a data set by using an arithmetic formula. The weighted average is observation multiplied by a weight and added up to find a solution. The weighted average component is given a weight of value to arrive at a specific answer. Based on the problem, both have different users and are computed differently. The main purpose of the weighted average is to find the right weight or value to solve. For example, the weighted average is the average value of the principal repayment of certain bonds or loans until a principal value is paid. An average is used to find the median value or average value.

This article is a guide to Average vs Weighted Average. We discuss the difference between average and weighted average with infographics and a comparison table. You may also have a look at the following articles: –

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