Weighted Average Price Calculator

Weighted Average Price Formula:

\[ WAP = \frac{\sum (Price_i \times Weight_i)}{\sum Weight_i} \]

Weighted Average Price (WAP):

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1. What is Weighted Average Price?

Weighted Average Price (WAP) is a calculation that takes into account the varying quantities of items purchased at different prices. It provides a more accurate average price than a simple arithmetic mean when dealing with different purchase quantities.

2. How Does the Calculator Work?

The calculator uses the weighted average price formula:

\[ WAP = \frac{\sum (Price_i \times Weight_i)}{\sum Weight_i} \]

Where:

\( WAP \) — Weighted Average Price (currency/unit)
\( Price_i \) — Individual price of item i (currency)
\( Weight_i \) — Quantity or weight of item i (count)
\( \sum \) — Summation of all items

Explanation: Each price is multiplied by its corresponding weight (quantity), these products are summed, and then divided by the total of all weights.

3. Importance of WAP Calculation

Details: WAP is crucial for inventory valuation, cost accounting, financial analysis, and determining the true average cost of goods when purchases are made at different prices and quantities.

4. Using the Calculator

Tips: Enter prices and weights as comma-separated values. Ensure both lists have the same number of elements. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between WAP and simple average?
A: Simple average treats all prices equally, while WAP considers the quantity purchased at each price, giving more weight to prices with higher quantities.

Q2: When should I use weighted average price?
A: Use WAP when you have purchased the same item at different prices and quantities, and need to determine the overall average cost per unit.

Q3: Can WAP be used for stock portfolio analysis?
A: Yes, WAP is commonly used to calculate the average purchase price of stocks bought at different times and prices.

Q4: What if my prices and weights lists have different lengths?
A: The calculator requires equal number of prices and weights. Please ensure both lists have the same number of elements.

Q5: Are there any limitations to WAP?
A: WAP assumes all units are identical. It may not be appropriate for items with significant quality variations or when time value of money is important.