Usually when you calculate an average, all of the numbers are given equal significance; the

numbers are added together, and then, divided by the number of numbers. With a Weighted
Average, one or more numbers is given a greater significance, or weight.

Find a Weighted Average

Use the SUMPRODUCT and the SUM functions to find a Weighted Average, which depends
on the weight applied to the values.

 For example, a shipment of 10 cases of pencils is 20 cents per case. But a second
shipment of 40 cases costs 30 cents per case, because pencils are in high demand. If you
averaged the cost of each shipment this way (0.20+0.30)/2 = 0.25, the result isn’t
accurate.

The math doesn’t take into account that there are more cases being sold at 30 cents than
at 20 cents. To get the correct average, use this formula to get the result (28 cents per
shipment):

=SUMPRODUCT(A2:A3,B2:B3)/SUM(B2:B3)

The formula works by dividing the total cost of the two orders by the total number of
cases ordered
How to calculate Weighted average SAM or
weighted average SMV ?

Whenever there is a need to find the average SAM, It becomes quite clear that simple average
doesn’t give us the right picture. This is because simple average divides the SAM equally
between all the styles. This division is wrong because there will be some styles with bigger order
Quantity and some styles with lesser order quantity and the effect of order quantity will not be
reflected in the averaged SAM. Therefore we need to calculate weighted average SAM whenever
there is need to find average.

This flaw of simple average is removed by weighted average.

So how can we calculate weighted average SAM or weighted

average SMV?
1. Multiply order quantity with respective SAM (or SMV) and sum it all.
2. Now divide this sum by sum of order quantities.

That’s it, the resultant is Weighted Average SAM (or SMV).

formula to calculate weighted average SAM or weighted average SMV

How to calculate weighted average SAM in Excel ?

Excel makes this even easier, instead of multiplying order quantity and SMV one by one,
SUMPRODUCT function can be used in excel to find the weighted average:

calcul
ate weighted average SAM or weighted average SMV in excel