Weighted Average

A weighted average is an average of a set of data that gives more weight, or importance, to some of the numbers based on how often they occur. A weighted average is the average of a set of numbers adjusted by the weight of the occurrence of numbers in the set. If a buyer pays several different prices from different suppliers, the weighted average price will be the price charged by each supplier multiplied by the number of items supplied at each price divided by the number of items purchased. So if a broker goes into the market to buy 20,000 shares of Company X and buys 10,000 at USD20; 8,000 at USD20.75; and 2,000 at USD21, the weighted average cost per share will be the amount spent at each price point divided by the total number of shares purchased; in this case USD20.40