Table of Contents### Calculating the Weighted Mean

Entire Site

In some data sets, one value might be more “important” than another. For example, suppose that your company has several divisions, the biggest of which does $100 million in annual sales and the smallest of which does only $1 million in sales. If you want to calculate the average profit margin for the divisions, it doesn't make sense to treat the divisions equally because the largest is two orders of magnitude bigger than the smallest. You need some way of factoring the size of each division into your average profit margin calculation.

You can do this by calculating the weighted mean. This is an arithmetic mean in which each value is weighted according to its importance in the data set. Here's the procedure to follow to calculate the weighted mean: