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Profits are ₹90,000, ₹1,20,000, ₹1,50,000 and ₹1,80,000, with weights 1:2:3:4. What is the weighted average profit?

Answer and explanation

Correct answer: ₹1,50,000

A weighted average gives greater influence to values with larger weights. It is different from an ordinary average because every profit is counted according to the importance assigned to it. The required result is therefore obtained by multiplying each profit by its weight, adding those products, and dividing by the total of the weights. This method is useful when recent years or selected observations are deliberately given unequal importance.

The weighted products are ₹90,000 × 1 = ₹90,000, ₹1,20,000 × 2 = ₹2,40,000, ₹1,50,000 × 3 = ₹4,50,000, and ₹1,80,000 × 4 = ₹7,20,000. Their total is ₹15,00,000, while the weights total 10. Thus weighted average profit is ₹15,00,000 ÷ 10 = ₹1,50,000. Therefore, option A is correct; ₹7,20,000 is only one product, not the average.

Related tags

GoodwillWeighted AveragePartnership AccountsPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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