Today we will learn how to calculate weighted average in Excel with percentages.
What is weighted average ?
Weighted average or weighted mean is defined as [from wikipedia],
The weighted mean is similar to an arithmetic mean …, where instead of each of the data points contributing equally to the final average, some data points contribute more than others.
…If all the weights are equal, then the weighted mean is the same as the arithmetic mean.
Why should you calculate weighted average?
Well, it is because, in some situations normal averages give in-correct picture. For eg. assume you are the CEO of ACME Widgets co.. Now you are looking annual salary report and being the numbers-gal you are, you wanted to find-out the average salary of your employees. You asked each department head to give you the average salary of that department to you. Here are the numbers,
Now, the average salary seems to be $ 330,000 [total all of all salaries by 5, (55000+65000+75000+120000+1200000)/5 ].
You are a happy boss to find that your employees are making $330k per year.
Except, you are wrong. You have not considered the number of employees in each department before calculating the average. So, the correct average would be $76k as shown above.
How to Calculate Weighted Average in Excel with Percentages
There is no built-in formula in Excel to calculate weighted averages. However, there is an easy fix to that. You can use SUMPRODUCT formula. By definition, SUMPRODUCT formula takes 2 or more lists of numbers and returns the sum of product of corresponding values. [related: Excel SUMPRODUCT Formula – what is it and how to use it?]
So, if you have values in B4:B8 and the corresponding weights in C4:C8, you can use SUMPRODUCT like this to get weighted average.
=SUMPRODUCT(B4:B8, C4:C8)
Caution: However, the above method works only if C4:C8 contains weights in percentages(%) totaling to 100%.
WAvg Formula Pattern (use this with your data)
=SUMPRODUCT(<your values>, <your weights>)What if my percentage weights don’t add up to 100%?
May be your weights are more than 100 percent. Or may be they are less than 100 percent. In both cases, you can use the below formula variation.
=SUMPRODUCT(B15:B19, C15:C19) / SUM(C15:C19)
The idea is to divide the total of weights with the SUMPRODUCT result so that we can adjust Weighted Average as the weights don’t add up to 100 percent.
WAvg Formula Pattern when weights don’t add up to 100 percent
=SUMPRODUCT(<your values>, <your weights>) / SUM(<your weights>)Weighted Average when you have counts instead of weights:
If you have count of observations instead of weights, you can still use the SUMPRODUCT formula to calculate weighted average in Excel.
Here is the formula for above example:
=SUMPRODUCT(B26:B30, C26:C30) / SUM(C26:C30)
Notice that this formula is same as the formula for weighted average with weights not adding up to 100 percent.
WAvg Formula Pattern when you have counts instead of weights
=SUMPRODUCT(<your values>, <your counts>) / SUM(<your counts>)Weighted Average with Extra Conditions
Let’s say you have city wise observations and weights. And you want to calculate the weighted average, only for Boston values. In this case, you can use a variation of the formula like below:
=SUMPRODUCT((C5:C16)*(B5:B16=F5),D5:D16)/SUMIFS(D5:D16,B5:B16,F5)
How does this formula work?
- SUMPRODUCT calculates the total value for BOSTON by summing up C5:C16 (value column) where B5:B16 is Boston (highlighted portion of the formula) and multiplies that with the counts.
- So in the above example, this will just give us the total of Boston – ie 218,600
- We then divide this with the total count of Boston (using the SUMIFS formula) – ie 400
- This results in the weighted average for Boston values alone – ie 546.50
For more information on how the conditions work inside SUMPRODUCT formula, please read this article.
Download Weighted Average Calculation Example Workbook:
In this workbook, you can find 4 examples on how to to calculate weighted average in excel. Go ahead and download it to understand the formulas better.
Weighted Average in Excel – Formula Explained
Here is a video with Weighted Average formula explained. Please watch it below to learn more. Alternatively, head to my YouTube page to see the weighted averages in Excel video.
In Conclusion
Weighted averages are a great way to explain data and every data analyst should know how and when to use them with their data. Apart from Weighted Average, I suggest learning how to use moving average and average of top n values. These will help you explain the data and trends to your audience better.
Do you use Weighted Mean / Weighted Average?
What do you use it for? What kind of challenges you face? Do you apply any tweaks to weighted average calculations? Please share your ideas / tips using comments.
17 Responses to “Custom Number Formats – Colors”
You are right, Chandoo. I was playing with the colour numbers last week and some of them don't appear different from each other. Others are totally different from yours.
@Duncan
Each version of Excel, post 2003, renders colors slightly differently
Different language versions may also have different default color palettes
Hello in french
excel 2010
colo1 = couleur1 = black
[couleur1]; [couleur2]; etc..
@Hui, thank you very much again for this great post.
However - under Excel 2007, Hungarian version your solution does not work with color names. I've tried both English and Hungarian names, but drops an error message "not valid formats"
Do you have any idea how to solve this issue?
thanks in advance
@Andras
Without a Hungarian version of Excel 2003 I don't think I can assist
Have you tried using the colour numbers? I couldn't get the names to work (despite using an english version of excel). but it did work with the numbers though. I left out the "u" and was easily able to produce burgundy using [color9]
Here a possible solution: find an English version of Excel, write there the formats using English names, then open the file in the Hungarian version and see the translation.
In Excel 2007 I can't get the colour names to work e.g Sea Green but the numbers do e.g color3 - colour3 does not work so I must bow to the country that has stolen my language (ha ha!)
Hey chandoo, nice Tip!
Wouldn't be easier just apply some conditional formatting for negative numbers and another for positive numbers? Or there's some cases that you can't do that?
Unfortunately the TEXT function doesn't color the cell as number formatting does.
Hi Hui,
Great post Sir, love the new way of formatting with color numbers.
I am using 2007, and it leads me to the last color number 56.
Thanks Hui.
[…] explains how to set up custom number formats with a wide array of […]
Thanks Hui - works a treat!
Thank you, very helpful.
Trying to figure out if it is possible to apply color only to a part of the cell?
E.g. I have a value formatted as Accounting with a currency symbol.
Those I find somewhat distracting though necessary. If I could make them less obtrusive by coloring them gray while the number would stay black, that would be great. Tried tinkering with the format string, but didn't get the desired result. Single color for complete cell value works, but coloring just part of it could not be achieved. Maybe somebody managed that?
Exactly what I was looking for - thank you!
colour in the Australian doesn't work - we have to go American and no problem.
I always thought is was 56 colours notice you have 57. Cool.
thanks
Analir Pisani
Customised Microsoft Office Training Specialist
Sydney - Australia
http://www.azsolutions.com.au
Thank You!