How to Calculate Weighted Average in Excel

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What is the weighted average formula?
The weighted average formula is a tool used to calculate averages that are weighted by different values. The weighted average takes into account the different values of each data point and gives them a weight, or importance, based on those values. This weighted average is then used to calculate the final average.

When to Use a Weighted Average
Use a weighted average when values have differing importance. But what exactly does that mean?

Here’s an example. Let’s say I’m looking to buy a new home, but I’m not sure what the average market value is in my neighborhood. My budget is $350,000, so I look at prices on five different homes:

$1,000,000
$800,000
$400,000
$300,000
$250,000
If I use the simple average formula, I get $550,000, which is well out of my price range. The problem? My average is wrong. This is because I haven’t accounted for how many homes are selling at each belize phone number material price point. Here’s the list again, but with the number of homes selling at that price in brackets.

$1,000,000 (1)
$800,000 (2)
$400,000 (10)
$300,000 (25)
$250,000 (15)
Using the weighted average formula lets me take into account that only one home is being sold for a million dollars, while 25x more homes are at the $300,000 price point. Using the weighted average formula, I get an average of $336,792, which is right in my wheelhouse.

It’s like magic, right? Here’s how it works.

sumproduct weighted average formula