# How to calculate Weighted Average for price increase/decrease

• May 12th 2008, 04:40 AM
Moe
How to calculate Weighted Average for price increase/decrease
Hello,
I have been asked recently by my manager to provide some analysis to the average price increase/decrease for our products. He mentioned that I need to use weighted average.

I am comparing the percentage of a price increase/decrease for 5 products during Jan 2007 & Jan 2008. My aim is to find the weighted average for the % of the price increase/decrease.
I have been told that weighted average is calculated using a different method and I am not sure how to do that.
I hope you can explain to me how weighted average is cacluated. Thank you
I have simply used the following method : Sum(13%,12.5%,-18.18%,0%,-3.85%)/5 = 0.69%

Please refer to the attached file for the example. Also note that my real life file consist of about 1000 products.
• May 14th 2008, 06:16 AM
TKHunny
Didn't we just do this one?

Double posting is discouraged.
• May 14th 2008, 06:18 AM
falcald
Are you comparing different products?

For example: PRODUCT PRICE LAST CHANGE (% or not) VOLUME

A 10 -1 100
B 15 +2 200
C 35 +1 50

You can weight each price change by price or by volume (I would use the volume). This would be:

BY PRICE:

[10*(-1)+15*(+2)+35*(+1)]/[10+15+35] = ...

This is rather odd because the higher the price, the higher the weight. And you do not measure importance by price.

BY VOLUME

[100*(-1)+200*(+2)+50*(+1)]/[100+200+50] = ...

This is correct. The total price change is related to the amounts of each product in stock.

Hope this helps!

Federico.
• May 14th 2008, 06:19 AM
falcald
I didn't know it has been solved before. Sorry.
Bye,

Federico.